A service-disabled veteran can own 51 percent of a company and still be denied SDVOSB certification because of one sentence in the operating agreement. The ownership floor in 13 CFR 128.200(b) is the easy half. The half that kills applications is 13 CFR 128.203: the veteran must control both long-term decision-making and day-to-day operations, and SBA reads control straight off the governing documents. If the 49 percent civilian partner holds a veto, a supermajority requirement, or a unanimity clause over ordinary business decisions, that is negative control, and negative control defeats eligibility no matter how the equity is split.
We are writing this from inside the problem. Valentor is a 51/49 Virginia LLC: a service-disabled veteran CEO holding 51 percent, a civilian co-founder CTO holding 49. Our SBA SDVOSB certification is in progress, and we drafted our operating agreement around 13 CFR 128.203 before we drafted anything else.
The stakes
Self-certification is dead. Since January 1, 2024, SDVOSB set-aside and sole-source awards can only go to firms certified by SBA and designated as such in SAM (FAR 19.1406(b); the parallel set-aside rule is FAR 19.1405(c)). Since December 22, 2024, agencies and prime contractors get SDVOSB goaling and subcontracting credit only for SBA-certified firms (SBA direct final rule, 89 FR 48266, implementing NDAA FY2024 sec. 864). Certification is the single gate to both the prime and the subcontract path.
Behind the gate, the market got bigger. NDAA FY2024 Section 863 raised the government-wide SDVOSB prime contracting goal from 3 percent to 5 percent (15 U.S.C. 644(g)(1)). FY2025 awards to SDVOSBs reached $32.5 billion, over the 5 percent target (SBA FY25 scorecard, released June 25, 2026). A contracting officer can sole-source up to $5 million for services, $8.5 million for manufacturing, to a certified SDVOSB (FAR 19.1406, thresholds set by FAC 2025-06, effective October 1, 2025). One badly drafted consent clause forfeits all of it.
What 128.203 requires beyond the 51 percent
Control under 13 CFR 128.203 has specific parts, and SBA checks the operating agreement, meeting minutes, and compensation records against each one:
The qualifying veteran must control long-term decision-making and run the day-to-day operations. Not nominally. If the civilian partner is the one signing contracts, setting budgets, and directing staff, the paper does not matter.
The veteran must hold the highest officer position. In a two-member LLC that means sole managing member, or manager and CEO, with no co-equal title held by the civilian.
If the veteran is not the highest-compensated person in the company, the application must include a written justification for why the arrangement is still in the firm's interest. Silence here is a denial waiting to happen.
None of this restricts what the 49 percent partner does operationally. A civilian co-founder can be an officer, an employee, and the technical lead. What the civilian partner cannot hold is the legal power to block ordinary business.
Negative control: the clause set that fails
Standard LLC templates are the enemy. A competent business attorney with no government-contracts background will, by default, protect the minority member: consent required for contracts above a threshold, for hiring and firing, for budgets, for opening bank accounts, for admitting new members. Every one of those, except the last, is negative control over ordinary business in SBA's eyes.
The trap that surprises founders most is the bank signature card. If the business account requires two signatures, or names the civilian partner as a required co-signer, the civilian can block payroll and vendor payments. That is operational veto power, and SBA has treated required co-signature arrangements as negative control. The veteran should be the primary signer, and the civilian partner must not be a required co-signer on anything.
The supermajority rules at 13 CFR 128.203(f) are where these provisions get tested. A 51/49 split means any supermajority or unanimity threshold on an ordinary decision hands the 49 percent holder a veto by arithmetic.
The extraordinary-action safe list
The regulation does leave the minority investor real protection. 13 CFR 128.203 permits the non-veteran member to hold blocking rights over a short list of extraordinary actions: issuing new equity, dissolution of the company, sale of the company or substantially all of its assets, merger, filing for bankruptcy, and amending the governance provisions that protect those rights. SBA revised its negative-control and extraordinary-action framework effective January 16, 2025; that is the version applications are judged against now.
The discipline is to treat the list as exhaustive. A consent right that "feels extraordinary" but is not on the list (approving annual budgets is the classic example) sits outside the safe harbor and puts the whole certification at risk.
There is now direct precedent on exactly the 51/49 structure. In Blue Skye Foods, LLC, SBA No. VSBC-442-A (decided September 4, 2025), an Ohio LLC with a 51 percent service-disabled veteran and a 49 percent civilian investor was denied certification under the 128.203(f) supermajority rules. OHA reversed. The operating agreement's minority protections stayed within the extraordinary-action list, so they protected the investor without giving him impermissible negative control, and OHA ordered the firm into the certification database. We are relying on the consistent accounts of the decision published by Crowell & Moring and the Government Contracts Legal Forum, both of which report the same case number, date, facts, and outcome. The holding confirms the safe list is a real harbor: a 49 percent civilian partner can be protected and the firm can still certify, so long as the drafting stays inside the lines.
How we drafted ours
Our operating agreement gives the veteran managing member unilateral authority over all ordinary business: hiring, budgets, contracts, and banking. The 49 percent member's consent rights are confined to the extraordinary-action list, verbatim, nothing added. The veteran is the sole required bank signer. He holds the only executive title, works the business full time, and if his compensation ever falls below the co-founder's, the written justification goes into the file the same week. The agreement then goes to a government-contracts attorney for review before the VetCert application is submitted, because this clause set is the most common denial reason for firms shaped like ours, and a $1,000 to $3,000 review is cheap against a lost certification cycle.
If you are a veteran founder with a civilian partner, do this before you apply. Pull your operating agreement and search it for "consent," "unanimous," "approval," and "supermajority." Map every hit against the extraordinary-action list in 13 CFR 128.203; anything outside the list gets redrafted. Check the bank signature card, not just the agreement. Confirm the veteran holds the highest office and actually runs operations, and write the compensation justification if you need one. Then have a government-contracts attorney, not a general business attorney, read it against 128.203. The application itself is free and SBA reported average processing of about 12 days as of November 2025, so the certification is fast once the document is right. Fix the document first.
Valentor Services Group LLC is a veteran-owned Virginia company. SBA SDVOSB certification in progress. This article is not legal advice; have counsel review your specific agreement. Reach us at contact@valentorgrp.com.