8(a) Certification: Are you earning revenue from a past employer?

When you apply for the 8(a) Program the SBA will look at your current year to date and the past two to three years of revenue and whom it earned its revenue from. If you have earned revenue from a client who happens to be your past employer the SBA may take issue with this.

The relationship your firm has with your former employer can have a negative impact on your ability to get successfully 8(a) Certified if it results in the ability for them to impact the ability for you to control your firm. Earning a large percentage of your revenue from a past employer may result in the SBA denying your application.

Why?

As stated above, the SBA will look at your mix of clients and if a large percentage of your revenue comes from a past employer they could possibly try to affiliate you with your past employer since you had a employer/employee relationship. There is no magical number for the percentage since they look at the totality of the relationship such as contracts, subcontracts, sharing of employees, facilities, etc.

If you do have a relationship with your former employer you should try to keep any possible affiliation to a minimum.

To determine your overall state of 8(a) eligibility including possible issues such as above, please visit https://cloveer.com/8a-eligibility-questionnaire/ and complete/submit your responses to us for a free eligibility analysis.

Need assistance with your 8(a) Application? With 15 years and over 2,000 successful applications under our belt, we can assure you that no matter which option you choose, Cloveer will work harder and faster to get your business SBA 8a certified.  Contact us today at 813-333-5800 or visiting our website at cloveer.com to discover what Cloveer can do for you.

 

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8(a) Certification and Community Property Laws

§124.104   Who is economically disadvantaged?

(2) When married, an individual claiming economic disadvantage must submit separate financial information for his or her spouse, unless the individual and the spouse are legally separated. SBA will consider a spouse’s financial situation in determining an individual’s access to credit and capital where the spouse has a role in the business (e.g., an officer, employee or director) or has lent money to, provided credit support to, or guaranteed a loan of the business. SBA does not take into consideration community property laws when determining economic disadvantage.

This means that both the applicant (individual claiming disadvantage) and his or her spouse must submit a separate SBA 413 Form during the 8(a) Application process, unless:

They are legally separated.

and;

The SBA will not split all assets and liabilities 50/50 unless they are jointly owned or there is a pre and/or post nuptial agreement that details which assets are held by one individual or another, separately.

§124.105   What does it mean to be unconditionally owned by one or more disadvantaged individuals?

(k) Community property laws given effect. In determining ownership interests when an owner resides in any of the community property states or territories of the United States (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Puerto Rico, Texas, Washington and Wisconsin), SBA considers applicable state community property laws. If only one spouse claims disadvantaged status, that spouse’s ownership interest will be considered unconditionally held only to the extent it is vested by the community property laws. A transfer or relinquishment of interest by the non-disadvantaged spouse may be necessary in some cases to establish eligibility.

This means that the applicant (individual claiming disadvantage) and their spouse must execute a community property transmutation agreement to ensure that they have transferred or relinquished the proper percentage of ownership held within the applicant firm so that the applicant has unconditional ownership of the applicant firm that is applying for the 8(a) Program.

If you need a template to prepare an acceptable Community Property Transmutation Agreement, please visit our shop that contains a template for purchase.