SBA OHA: Common Investment Affiliation Analysis Not Tied to Entity Treatment on Tax Returns

Common investment affiliation can arise when SBA believes that two individuals’ common investments in multiple entities may make the individuals in question act with a common purpose. As few as two common investments can form the basis for affiliation.

A recent SBA Office of Hearings and Appeals opinion examines the argument that the number of common investments should be counted the same way the number of entities is treated for tax purposes. OHA’s answer: Nope.

Continue reading

Common Investments Affiliation: Shared Real Estate Can Count

So-called “common investments” affiliation under the SBA’s affiliation rules arises most frequently when individuals own common interests in at least two operating companies.  But common investments affiliation can also be based on common interests in real estate.

In a recent decision, the SBA Office of Hearings and Appeals held that the SBA had performed an inadequate size determination because the SBA Area Office asked the protested company about common investments in companies–but didn’t directly ask about common investments in real estate.

Continue reading

SBA OHA Sets Low Bar For Common Investments Affiliation

As few as two common outside investments can result in a presumption of identity of interest, and therefore likely affiliation, according to a recent decision by the Small Business Administration Office of Hearings and Appeals.

OHA’s decision in W. Harris, Government Services Contractor, Inc., SBA No. SIZ-5717 (Mar. 7, 2016), lends some clarity to the SBA’s identity of interest affiliation rule, which provides that businesses or firms are affiliated when they have identical or substantially identical business interests. Although it brings the rule more into focus, the decision in W. Harris could prove troublesome to some small business owners, who may have assumed that a handful of common outside investments would not result in affiliation.

Continue reading

SBA OHA: Shared Ownership In Eight Companies Caused Affiliation

Individuals who had common investments in eight different companies were treated as a single person for purposes of the SBA’s affiliation rules–and the aggregation of those owners’ interests cost one company a small business set-aside award.

In a recent decision, the SBA Office of Hearings and Appeals explained how the little-understood common investments affiliation rule works, and in so doing, provided an important warning to business owners who may not realize that affiliation can result from common investments in multiple entities.

Continue reading

SBA Affiliation Rules: President Controlled Company Despite Removal Provision

A company’s President was deemed to control the company for purposes of the SBA affiliation rules, even though the company’s majority shareholder had the unilateral right to remove the President from office at any time.

In a recent size appeal decision, the SBA Office of Hearings and Appeals held that a company’s President exercised “critical influence” over the company, and that the President’s influence was not rendered illusory simply because the 100% owner could remove the President from office.

Continue reading

The SBA’s “Common Investments” Affiliation Rule: A SBA OHA Primer

“Common investments” affiliation under the SBA affiliation rules can occur when the SBA believes that two individuals’ common investments in multiple companies will cause the individuals in question to act with a common purpose.

A recent SBA OHA size appeal decision shows how the common investments rule can work in practice–in this case, resulting in the business in question being deemed affiliated with several other companies.

Continue reading