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A non-profit is not a “small business”… but its for-profit subsidiary can be!

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From: Goza, Helen M. <Helen.Goza@sba.gov>
Subject: RE: For Profit Subsidiary of a Not for Profit

…Non-profit is irrelevant for determining size, and a subsidiary of a non-profit can be awarded a small-business set aside because per regulation at 13 C.F.R. § 121.105(a)(1), an eligible small business is defined as:

Except for small agricultural cooperatives, a business concern eligible for assistance from SBA as a small business is a business entity organized for profit, with a place of business located in the United States, and which operates primarily within the United States or which makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor.

Note that it requires that the small business itself be “a business entity organized for profit”, but it does not state that the firm’s affiliates also must be for-profit entities. To the contrary, 13 C.F.R. § 121.103(a)(6) states “[i]n determining the concern’s size, SBA counts the receipts, employees, or other measure of size of the concern whose size is at issue and all of its domestic and foreign affiliates, regardless of whether the affiliates are organized for profit.” This indicates that a firm can be affiliated with firms that are not organized for profit and that their receipts/employees etc.. will be counted the same as any other affiliate of a small business.

Therefore, if the size of the parent non-profit and the for profit subsidiary and all affiliates combined is below the size standard they are eligible to make offers on small business set-asides.

Helen Goza
Area Office Size Specialist
Office of Government Contracting, Area 2
U.S. Small Business Administration
(484) 868-3263

helen.goza@sba.gov

(Additional Resource: SBA Compliance Guide: Size and Affiliation

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