On December 18, 2018, President Trump signed the Small Business Runway Extension Act that changes the time period in which a small businesses is determined to be small. Specifically, the look-back period for determining small businesses’ size status has been changed from three years to five years. This means that a company’s small business status will be based on its last 5-year average of revenue or employee count. This will, in many cases, permit companies to remain small for a longer period of time.
This new law will not go into effect until the SBA revises their regulation on the look back period from 3 years to 5 years. We will keep you posted.
The Small Business Runway Extension Act of 2018 (HR6330)
Posted in Featured
In the Size Appeal of MCH Corporation, SBA No. SIZ-5622 (December 8, 2014), the SBA Office of Hearing and Appeals (SBA OHA) held that a clear line of fracture existed between family members’ companies. The SBA OHA noted that “factors that may be pertinent in examining clear line of fracture include whether the firms share officers, employees, facilities, or equipment; whether the firms have different customers and lines of business; whether there is financial assistance, loans, or significant subcontracting between the firms; and whether the family members participate in multiple businesses together.”
Against these factors, SBA OHA found that a clear line of fracture existed. Although the two companies were are presumed affiliated based on the family relationship (parent child), as of the date for determining size, they had no business dealings with one another, did not have common owners or managers, and did not share employees or facilities. As a result, the presumption of identity of interest was rebutted. SBA OHA noted that while the two companies had a past history of business dealings, there were no such dealings at the time of self-certification for the procurement.
This case illustrates the need to keep business dealings between companies with family relationships to a minimum. This does not mean there can be no business dealings, but not to a point where there is interdependence.
Posted in Family Relationship - Affiliation, Featured
