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Chapter 5

SELF-EMPLOYMENT PLAN

5.01  Self-Employment Overview 

5.02  Startup Business versus Existing Business

5.03  Vocational Exploration for Self-Employment

5.04  Assistance Approvable under Self-Employment

a.  Assistance for Self-employment

b.  Retroactive Induction

c.  Prohibited Assistance for Self-employment

5.05  Development and Redevelopment of the Self-employment Plan

a.  Phases of the Self-employment Plan Development

b.  Considerations for Self-employment Plan Development

5.06  Case Management Appointment and Follow-up Activities

5.07  Individualized Employment Assistance Plan

a.  Determination of Job-readiness

b.  Individualized Employment Assistance Plan Development

c.  Case Management Activities

5.08  Outcomes of a Self-employment Plan

a.  Rehabilitation

b.  Discontinued

5.01  Self-Employment Overview

(Change Date October 16, 2024) 

In accordance with 38 U.S.C. § 3104(a)(12), the Chapter 31 program provides assistance for self-employment to an eligible claimant who has the interest and necessary skills to start a business that does not aggravate the claimant’s service-connected disability conditions.

Veteran Readiness and Employment (VR&E) defines self-employment as the state of earning income by directly working for oneself in a majority-owned, suitable trade, business, or profession. A self-employed individual is fundamentally defined by their autonomy in business operations, financial responsibility, and tax obligations determined by federal guidelines, whose primary reliance for income is on the performance of services in the individual’s own business. The individual is responsible for the oversight and management of business operations, expenses, and taxes.

5.02  Startup Business versus Existing Business

(Change Date October 16, 2024) 

VR&E only supports a startup business for a self-employment plan. VR&E defines a startup business as a business in its early development stages. The claimant aims to create a product or service he or she believes will be in demand among consumers. A startup business may rely on outside investors or loans to finance initial expenses, such as product development and marketing.

Activities for starting a new business include conducting market research, writing a business plan, identifying funding sources and the business location, complying with business requirements, and, if applicable, obtaining federal and state tax ID, license(s), permit(s), and opening a business bank account.

An existing business is not within the scope of the self-employment track. Refer to M28C.IV.B.1 for more information on an existing business.

5.03  Vocational Exploration for Self-Employment

(Change Date October 16, 2024)

The vocational exploration process is explained in detail in M28C.IV.B.2. The information below applies specifically to vocational exploration for self-employment.

The VRC must evaluate the claimant’s ability to perform the essential duties and responsibilities for establishing and maintaining self-employment. In addition, the VRC is responsible for evaluating the appropriateness of self-employment for the claimant by assessing the claimant's rehabilitation needs, readiness, and identifying potential barriers to the claimant's pursuit of self-employment.

The assessment of whether self-employment is an appropriate vocational goal may include, but is not limited to, the following:

• Aptitudes, interests, abilities, and transferable skills
• Business planning, operation, and management skills
• Stability and progression of the claimant's disability conditions that may affect establishing and operating a business
• Personal resources including financial resources and other support systems
• Legal considerations
• Personal commitment and resilience

If the VRC determines that self-employment is an appropriate vocational goal for the claimant, the VRC must document the vocational exploration on VAF 28-1902n, Counseling Record - Narrative Report (Supplemental Sheet), and develop an Individualized Written Rehabilitation Plan (IWRP) for self-employment. The VRC must send VR-64, Positive Decision Letter to the claimant.

If the VRC determines that self-employment is not currently an appropriate vocational goal, the VRC must document the decision in the claimant’s electronic record and must explore alternatives, such as traditional employment.

The VRC must inform the claimant of the outcome of the evaluation in writing by using VR-58, Adverse Decision Letter to the claimant.

5.04  Assistance Approvable under Self-Employment

(Change Date October 16, 2024)

The claimant may be provided with goods and services that are necessary to start their approved business under the provisions of 38 CFR § 21.214(e) and § 21.257(d).

a.  Assistance for Self-employment

(Change Date October 16, 2024)

• Vocational training, which is limited to short-term skills training that does not lead to a college degree or diploma
• Incidental training in the management of a business
• Essential equipment, and tools, including machinery, occupational fixtures, accessories, and appliances
• Minimum stocks of materials or supplies required for starting the business, e.g., inventory of saleable merchandise or goods, expendable items required for day-to-day operations, and items which are consumed on the premises, licenses or other fees required for self-employment.

b.  Retroactive Induction

(Change Date April 1, 2021) 

A claimant may be considered for a retroactive induction only if the claimant has incurred training expenses at an approved VA training facility that is geared towards establishing an approved self-employment plan. The training must be related to the specific skills required for implementing or operating the approved business.

A claimant must not be authorized for a retroactive induction if the business has already been established and operational for at least 12 months.

Refer to M28C.V.B.6 for information on the process for retroactive induction.

c.  Prohibited Assistance for Self-employment

(Change Date October 16, 2024)

In accordance with 38 CFR § 21.214 (f), a claimant may not be authorized self-employment assistance for any of the following items:

• Purchase of, or partial payment for land or buildings
• Making full or partial payment of leases or rentals
• Purchase or rental of trucks, cars, or other means of transportation
• Stocking a farm for animal husbandry operations

In addition, any startup business that is related to medical marijuana or a legalized recreational substance industry must not be authorized for self-employment. Use of medical marijuana or a legalized recreational substance in states where it is legal, may not bar access to federal funding for a program of VA vocational rehabilitation services. However, the provision of goods and services related to training and tools for cultivating, distributing, dispensing, or selling medical marijuana or a legalized recreational substance industry cannot be authorized in a vocational rehabilitation plan.

5.05  Development and Redevelopment of the Self-employment Plan

(Change Date October 16, 2024)

An Individualized Written Rehabilitation Plan (IWRP) for self-employment must be developed when a self-employment goal has been identified, as outlined in M28C.IV.C.2.

a.  Phases in the Self-employment Plan Development

(Change Date October 16, 2024)

The development of an IWRP for self-employment involves two phases:

1.  The first phase consists of determining the feasibility of the business concept and viability of the business plan.

• The feasibility of the business concept refers to examining the likelihood that the plan has the potential to operate successfully and generate reasonable profits.
• The determination for feasibility of the business concept is conducted with the assistance of SBA or other sources to determine if the selected business is reasonable, achievable, and has the potential for gains. Once a claimant is referred to SBA or other sources for assistance, the VRC must work collaboratively with the business consultant and the Self-employment Panel (SEP) to facilitate the feasibility analysis of the business plan.

2.  The second phase consists of redeveloping the IWRP once the business plan is approved for implementation.

b.  Considerations for Self-employment Plan Development

1.  Phase One: Development of the Self-Employment Plan

(Change Date October 16, 2024)

Phase one is the development of the IWRP for self-employment that outlines the intermediate objectives for determining the feasibility of the business concept and viability of the business plan. Since the business plan has not been implemented at this point in the IWRP, the VR&E Officer’s concurrence on this plan is not required per 38 CFR 21.258.

(a)  Use of Dictionary of Occupational Titles

When assigning the Dictionary of Occupational Title (DOT) code, use the code that corresponds to the proposed type of business or occupation.  

(b)  Develop intermediate objectives for Phase One of the Self-Employment Plan which may include, but are not limited to the following activities:

• Referral to the SBA or other resources to assist the claimant with the feasibility of the business concept
• Identifying required training, certifications, or licensure
• Development of the business plan
• Determination that claimant is financially ready to establish a business, which includes obtaining and understanding a credit score, asset development, and financial sources

(c)  The claimant must be referred to SBA or other resources for assistance during the self-employment process.

Referrals to SBA or other resources require completion of Appendix FM, SBA Referral for Self-Employment, or Appendix FN, Referral for Self-employment, and VAF 3288, Request for and Consent to Release of Information from Individual's Records. In addition, SBA also requires the claimant to sign Appendix FR, SBA Release of Information, when he or she reports to the SBA scheduled meeting.  

The following are some suggested resources for self-employment assistance:

(1)  Small Business Administration

(Change Date October 16, 2024)

A Memorandum of Understanding (MOU) between VBA and SBA was executed to assist claimants to develop a feasible and viable business plan for self-employment. Refer to Appendix FK, Responsibilities under the VR&E and SBA Partnership, for the summary of the roles and responsibilities outlined in the MOU. The SBA is a federal government agency that provides free community-based counseling, advice, and information on starting a business. The SBA has district offices located around the country that offer services through a variety of programs, which include the following:

• SCORE is a non-profit association of volunteer business counselors trained to serve as advisors and mentors to people attempting to start a business.
• Small Business Development Centers  (SBDC) are partnerships primarily between the government and colleges/universities. SBDCs provide education services to people who are attempting to start a business. SBDC services include financial, marketing, production, organization, engineering, and technical issues and feasibility analysis of the business concept.
• Veterans Business Outreach Centers (VBOC) are designed to provide entrepreneurial development services such as business training, counseling, and mentoring services. VBOCs provide pre-business plan workshops, concept assessments, business plan preparations, and feasibility analysis of the business concept.

Note: Refer to SBA’s National Resource Guide (English) | U.S. Small Business Administration (sba.gov) for comprehensive information on assistance and additional resources for self-employment.

(2)  Office of Small and Disadvantaged Business Utilization

(Change Date February 14, 2017)

VA's Office of Small and Disadvantaged Business Utilization (OSDBU) provides claimants with access to economic opportunity by leveraging the federal procurement system and expanding the participation of procurement-ready small businesses. The VA OSDBU engages with SBA to stay informed about the status of small businesses. The OSDBU provides a range of services, including educational programs and training, tailored for Veteran-owned and other small businesses, and conducting business within both federal and commercial marketplaces.

(3) Veteran Entrepreneur Portal

(Change Date February 14, 2017)

The Veteran Entrepreneur Portal (VEP) is designed to save claimants time by offering direct access to the resources necessary to guide them through every step of entrepreneurship through Business USA and VA OSDBU.

Note: The VRC must review all SBA or business consultant recommendations for developing the business plan. This review includes determining whether the recommendations are acceptable and reasonable. The VRC has the prerogative to not accept recommendations if the VRC determines that the recommendation(s) will not result in a viable business plan.  

(d)  Development of the Business Plan

(Change Date February 14, 2017)

The claimant is responsible for developing the proposed business plan with assistance from SBA or other business consultants. The proposed business plan must serve as a stand-alone document that addresses all business concerns and can describe the business to a potential lender.

Per 38 CFR § 21.257(f), the feasibility analysis of the business concept, included in the business plan, must include the following:

• An analysis of the economic viability of the proposed business
• A cost analysis specifying the amount and types of assistance that VA will provide
• A market analysis of the claimant’s proposed services or products
• Availability of financing from non-VA sources, including the claimant’s personal resources, local banks, and other sources
• Evidence of coordination with the SBA or other resources to secure special consideration under section 8 of the Small Business Act, as amended
• The location or site for the proposed business, including the cost of the site, if any
• A training plan to operate a successful business

(e)  Referral to the Self-employment Panel  

(Change Date October 16, 2024)

The VRC must refer the case to the Self-Employment Panel (SEP) for assistance with the feasibility analysis of the business plan. The SEP is a consultative panel established in each VR&E office, which consists of a VRC or Employment Coordinator (EC), the referring VRC, a business consultant from the Small Business Administration (SBA) or other local representative with expertise in self-employment. The members of the panel have expert knowledge and can provide recommendations to facilitate the decision-making and planning process for self-employment. Refer to M28C.II.A.4 for more information on the roles and responsibilities of the SEP members.

The VRC coordinates with SEP and ensures that a comprehensive report, including the feasibility analysis findings, is completed. The VRC must address the SEP recommendations. Subsequently, the VRC must inform the claimant if any further action is needed. The next steps must be documented on VAF 28-8606, Notes from Counseling and Next Steps. A copy of the completed form must be provided to the claimant and uploaded in the electronic record. Once the VRC approves the updates on the business plan as recommended by the SEP, the case does not need to return to the SEP.

(f)  Outcome of the Feasibility Analysis

(1)  The Business Plan is not Feasible

(Change Date October 16, 2024)

If the business plan is determined infeasible, the VRC must advise the claimant of the option to redevelop the business plan. Subsequently, if the revised business plan is determined infeasible, the VRC may consider an alternative option for employment, such as traditional employment. 

(2)  Business Plan is Feasible

(Change Date October 16, 2024)

If the business plan is determined feasible, the VRC must redevelop the plan with the claimant. The amended plan must outline the necessary supplies and services for the claimant to achieve his or her vocational goal, as outlined in the next section.  

2.  Phase Two: Redevelopment of the Self-employment Plan

(Change Date October 16, 2024)

Phase Two is the redevelopment of the IWRP for self-employment once the business plan has been approved by the VRC.

(a)  Amendment of the IWRP for Self-Employment

(Change Date October 16, 2024)

(1)  A new VAF 28-1902n must be completed to outline the activities for the redevelopment of the self-employment plan.

(2)  The plan must be amended to include plan objectives for the necessary services and assistance under the provisions of 38 CFR § 21.214, § 21.252, and § 21.257.

(3)  When assigning the Dictionary of Occupational Title (DOT) code, for the redeveloped plan use one of the following:

1. If the claimant is performing the duties for operating the business, use the DOT code that corresponds to the proposed type of business or occupation.
2. If the claimant is managing the business and does not perform the duties for operating the business, use DOT code 189, Miscellaneous Managers and Officials.

Refer to section 5.04 of this chapter for more information on services that are approvable under a self-employment plan.

(b) Required Concurrence of the Plan

(Change Date June 21, 2023)

(1)  VR&E Officer’s Concurrence

In accordance with 38 CFR 21.258, the VR&E Officer must concur with any self-employment plan with an estimated or actual total cost of $49,999 or less prior to the execution of the business plan. The VRC must prepare and submit Appendix FD, Approval Request for Self-Employment Plan, for the VR&E Officer’s approval. 

The following documentation must be submitted to the VR&E Officer for review:

1. Amended self-employment plan
2. Appendix FD, Self-Employment Plan Approval Request
3. Appendix FO, Itemized Program Cost for Self-employment
4. Business Plan
5. Completed VAF 28-1902n, Counseling Record - Narrative Report
6. Self-employment Panel Report

(2)  Executive Director’s Concurrence

The Executive Director of VR&E Service must concur with any self-employment plan with a total cost of $50,000 or more prior to the execution of the business plan. The VRC must prepare and submit the request for the Executive Director’s approval for the self-employment plan.

The following documentation must be submitted to the VR&E Corporate mailbox at vre.vbaco@va.gov.

1. Appendix FD, Self-Employment Plan Approval Request
2. Appendix FO, Itemized Program Cost for Self-employment
3. Amended self-employment plan
4. Completed VAF 28-1902n, Counseling Record - Narrative Report
5. Business Plan
6. Self-Employment Plan Report

(3) Outcome of the Concurrence Process

(a)  If the amended self-employment plan is approved, the claimant and VRC must sign the amended VAF 28-10214, Rehabilitation Plan. The VRC must provide a copy of the signed VAF 28-10214 to the claimant and upload a copy in the claimant’s VR&E electronic record. The claimant must be notified of the approval in writing using VR-64, CH31 Positive Decision Letter, or VR-67, Positive Ch31 Decision Letter - Plan Development.

(b)  If the self-employment plan is not approved, then the VRC must take one of the following actions:

1. Execute corrective action(s) for approval of a revised self-employment plan.
2. Consider alternative rehabilitation options if revision does not result in approval.

The claimant must be notified of the disapproval in writing using VR-58, CH31 Adverse Decision Letter.

5.06  Case Management Appointment and Follow-up Activities

(Change Date October 16, 2024)

The VRC must ensure that the services outlined in the intermediate objectives of the self-employment plan are provided to the claimant. In addition, the VRC must monitor the claimant’s progress and discuss any concerns or issues that may arise to ensure that the claimant successfully achieves his or her rehabilitation goal. Refer to M28C.V.A.2 for the level of case management for self-employment.  

The case manager must conduct case management appointments (CMA) and follow-up activities to ensure that all identified rehabilitation needs are addressed and provided to the claimant. The case management activities must include a review of the business financial statements, such as an income statement, profit and loss statement, and tax return. These reviews must be conducted by the VRC with assistance from SBA or a business consultant or a member of the SEP.

5.07  Individualized Employment Assistance Plan

(Change Date October 16, 2024)

a.  Determination of Job-readiness

(Change Date October 16, 2024)

Once the services outlined in the plan have been provided to the claimant and there are no impediments to operating the business, the VRC must determine the claimant’s job-readiness. The justification for the job-ready decision must be documented in the claimant’s electronic record. 

b.  Individualized Employment Assistance Plan Development

(Change Date October 16, 2024)

Upon completion of the plan objectives and after declaration of the claimant’s job readiness, the VRC must develop an Individualized Employment Assistance Plan (IEAP) with the claimant. In addition, the case status must be changed to Job Ready (JR).  Refer to M28C.III.A.1 for more information on case status procedures.

If a combined IWRP/IEAP had been previously developed, the VRC must update the plan to ensure that employment services are outlined clearly and the periods for those services are current. In addition, a plan objective must be added to include a review of the business financial statements, such as income statements, profit and loss statements, and tax returns. This review must be conducted by the VRC with assistance from SBA or a business consultant.

In accordance with 38 CFR 21.268, the case manager must determine the claimant’s eligibility for Employment Adjustment Allowance (EAA) and process the payment correctly as outlined in M28C.V.B.9.

c. Case Management Activities

(Change Date October 16, 2024)

The VRC must monitor the claimant’s progress and discuss any concerns or issues that may arise to ensure that the claimant successfully achieves his or her rehabilitation goal. A minimum of 12 months of case management appointments must be conducted while the case is in JR status for all self-employment cases. Any period of interruption, while the case remains in JR status, is not calculated in the 12-month period. During the 12-month period of employment services, the case manager must conduct at least one site visit at the business location. However, if the business is online only, the case manager must access and review the activities of the business online.

5.08  Outcomes of a Self-employment Plan

(Change Date October 16, 2024)

a.  Rehabilitation

(Change Date October 16, 2024)

Refer to M28C.V.A.6.02.b.5 for information on the declaration of rehabilitation and procedures for case closure.

b.  Discontinued

(Change Date October 16, 2024)

The claimant’s case will be placed in Discontinued status if he or she takes one of the following actions:

1. Decides not to pursue the plan of services for self-employment.
2. Does not respond to attempts to continue to pursue services.
3. Demonstrates unsatisfactory progress or non-cooperative behavior.
4. Does not complete planned services within the allowable timeline.

Refer to M28C.V.A.6 for information on procedures for case closure for discontinuance.

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