Can You Own a Business While in the Military? Rules and Approvals

Yes, you can own a business while in the military, but only with written approval from your chain of command and only if the business stays fully separated from your military duties, government resources, rank, and uniform. Active-duty service members, reservists, and National Guard members are all permitted to run outside businesses under Department of Defense ethics rules, provided the venture doesn’t interfere with readiness, create a conflict of interest, or trade on your military identity. Skip the approval step and you’re exposed to punishment under Article 92 of the Uniform Code of Military Justice.¹

Two overlapping frameworks control what’s allowed. The Joint Ethics Regulation, reissued under DoD Directive 5500.07 in May 2024, sets DoD-wide standards for outside employment, use of government resources, and conflicts of interest.² On top of that, 5 CFR Part 2635, Subpart H governs outside activities for all executive branch employees and prohibits any outside work that conflicts with your official duties.³ The organizing principle behind both is the same: your military obligations come first, and any business you run has to demonstrably fit around them.

Getting Approval Before You Start

Every branch requires a written outside-employment request submitted before you begin operating. Forms vary, but the information you’ll need to provide is consistent:

A description of the business, its products or services, and where it operates.
Your anticipated hours and how you’ll keep them clear of duty time and readiness requirements.
Expected income and the identities of any partners or co-owners.
Whether any customers are defense contractors, DoD entities, or other prohibited sources.
How you’ll keep the business separate from your military duties, including during deployments or schedule changes.
Any professional or local business licenses the industry requires.

The request goes through your immediate chain of command. Your supervisor reviews it for interference with duty performance and unit readiness, then forwards it with a recommendation to the Staff Judge Advocate or an ethics counselor. Legal review checks for conflicts with the JER, 5 CFR 2635, and the federal criminal statutes below. Your commanding officer makes the final decision.²

Approval is usually granted for one year and needs to be renewed. The process typically takes 30 to 60 days, depending on complexity and how quickly legal review clears. Don’t start operating before written approval is in hand. Running a business without it is itself a violation and can be punished under Article 92.¹

If the business will operate out of on-post family housing, you need separate permission from the installation commander. Installations run home-based business applications through installation safety, the Judge Advocate General’s office, and the garrison commander, and the review can take around 60 days.⁴ Operating without that approval can produce lease violations and, sometimes, eviction from post housing.

What You Can’t Use: Government Resources, Rank, and Uniform

The wall between your military life and your business has to be absolute when it comes to government property. Government-issued computers, phones, printers, email accounts, and office supplies cannot be used for any commercial purpose. Federal resources exist for official duties only, and diverting them to a side business can bring criminal charges under 18 U.S.C. § 641, which covers theft or conversion of government property.⁵ The JER reinforces this by specifying that government resources may be used for official purposes only.²

Your military identity is equally off-limits. You cannot use your rank, title, or position in a way that suggests the DoD endorses your products or services. The JER specifically prohibits using official titles, photographs in uniform, identifying devices like lanyards or lapel pins, and DoD protected symbols or imagery in connection with a business.² That means no dress-blues headshot on the company website, no rank on business cards, and no marketing copy implying government backing. You also can’t wear the uniform to business meetings or while performing commercial work. The prestige of military service isn’t a sales tool.

Who You Can’t Sell To

Rank creates a pressure problem the ethics rules take seriously. You cannot solicit sales from anyone junior to you in rank, grade, or position, and the prohibition extends to their family members, on or off duty.² A sergeant with a side business can’t pitch products to privates in the unit, even at a weekend barbecue. The superior-subordinate relationship makes a real “no” hard to give, and the implicit pressure is what turns a sales pitch into a fraternization or misconduct problem.

Conflict-of-Interest Laws With Real Prison Exposure

Two federal criminal statutes shape what kind of business you can safely run. 18 U.S.C. § 208 makes it a crime for a government employee to participate in an official matter that affects their personal financial interests. If your side business sells software to military units and you have any role in evaluating, recommending, or approving technology purchases, that’s a textbook § 208 violation.⁶

18 U.S.C. § 205 prohibits government employees from acting as agents or attorneys for anyone in connection with a matter in which the United States is a party or has a substantial interest. In practical terms, your business cannot represent clients in claims against the federal government, bid protests, or similar proceedings while you’re in uniform.⁷ Both statutes carry criminal penalties under 18 U.S.C. § 216. These aren’t rules enforced with a stern talking-to; they carry real prison exposure.

Passive Income Is Treated Differently

The outside-employment approval process focuses on active business operations where you’re providing services, managing employees, or selling products. Passive investments like owning rental property through a management company, holding stocks, or earning royalties from a book you wrote on your own time generally don’t require outside employment approval, because you aren’t actively performing work for compensation.

The § 208 conflict rule still applies, though. Owning stock in a defense contractor is legal; participating in a procurement decision involving that contractor is not.⁶ Passive income is a lower-maintenance path, not a loophole.

Reservists and National Guard Members

Reservists and Guard members have more practical room to run a business simply because they aren’t on active duty every day. The ethics rules still apply during drill weekends, annual training, and any period of activation, but the day-to-day operational window is wider. The DoD treats enlisted reservists and Guard members as special government employees, which means they’re subject to the same conflict-of-interest statutes, but only in relation to matters they’ve personally worked on or that are pending in their agency.⁸

Activation is the biggest operational risk. If you’re called to active duty, you may need to pause or hand off operations on short notice. Planning for that contingency in advance — through a partner, a manager with signing authority, or automated systems — is what separates military entrepreneurs who survive activation from those who lose customers and revenue.

Deploying With an Active Business

Deployment doesn’t end your business obligations, but the Servicemembers Civil Relief Act provides real relief. Under 50 U.S.C. § 3955, you can terminate leases for premises used for professional or business purposes if you receive military orders for a PCS or deployment of 90 days or more. You deliver written notice with a copy of your orders to the landlord, and termination takes effect on the next rent date following 30 days after notice is delivered.

The smart planning move is building deployment contingency in from the start: designate a trusted person with power of attorney, automate billing and fulfillment where possible, and hold enough cash to cover fixed costs during an extended absence. The SCRA can protect the person; it can’t run the company for you.

Professional License Portability Across PCS Moves

If your business relies on a professional license, PCS moves used to mean re-licensing in every new state. Federal law now addresses that. Under 50 U.S.C. § 4025a, if you hold a professional license in good standing and relocate on military orders, your existing license is treated as valid in the new state once you submit an application with proof of your orders and a notarized affidavit confirming your good standing.⁹ The same protection extends to military spouses.

The new state’s licensing authority must act within 30 days or issue a temporary license with the same rights as a permanent one. If your profession is governed by an interstate compact, the compact’s rules take precedence and this portability provision doesn’t apply.⁹

Taxes on Military Business Income

Military pay and business income are taxed under separate frameworks. Business profits get reported on Schedule C, and if your net self-employment earnings exceed $400 in a year, you owe self-employment tax (Social Security and Medicare) on top of regular income tax, reported on Schedule SE.¹⁰ That $400 threshold catches almost any profitable side business.

One trap: the SCRA caps interest rates and provides various protections for military-related obligations, but it does not shield business income. Non-military income isn’t protected under the SCRA, and if your business earns money in a state other than your state of legal residence, you may owe income tax in that state.¹¹ Your military pay follows your state of legal residence; your business income follows where the income is earned.

Who Owns What You Invent

If your business involves creating software, inventions, or patentable technology, Executive Order 10096 sets the government’s patent policy for all government employees, including military members.¹² The government takes full ownership of any invention you make during working hours, using government facilities or equipment, or that directly relates to your official duties. If any of those three conditions apply, the invention belongs to the government.

When your contribution doesn’t cleanly fall into one of those categories, the government may still reserve a royalty-free license to use the invention for governmental purposes while leaving you the title. If none of the conditions apply, you keep everything. The practical takeaway: develop products for your business on your own time, with your own equipment, in a field unrelated to your military specialty, and keep detailed records of when and where you worked on the project. That documentation is your proof if ownership is ever disputed.

Restrictions That Follow You After Service

The ethics rules don’t vanish the day you separate. The Procurement Integrity Act bars former military members from accepting compensation from a contractor for one year after leaving service if they played a key role in a procurement over $10 million involving that contractor. Triggering roles include contracting officer, source selection authority, program manager, or personally deciding to award a contract of that size.¹³

For senior officials — generals, flag officers, and Senior Executive Service members — the restrictions are tighter. Anyone who participated personally and substantially in an acquisition over $10 million must obtain a written ethics opinion from a DoD ethics counselor before accepting work with that contractor, and the contractor cannot pay the former official without first confirming that the opinion was requested or received. This two-year lookback applies even if you plan to start your own company and subcontract back to the DoD.¹³ If you’re thinking about a defense-adjacent business after service, talk to an ethics counselor well before your separation date.

Members on transition leave sit in a gray zone. The Procurement Integrity Act’s compensation ban doesn’t technically apply until separation, but the JER still requires prior written approval from your agency before you accept paid employment with a prohibited source while you’re still serving.

1
Office of the Law Revision Counsel. 10 USC 892 – Art. 92 Failure to Obey Order or Regulation
2
DoD Standards of Conduct Office (SOCO). Joint Ethics Regulation (JER) May 15, 2024
3
eCFR. 5 CFR Part 2635 Subpart H – Outside Activities
4
The United States Army. Post Residents Must Get Approval for Most Home-Based Businesses
5
Office of the Law Revision Counsel. 18 USC 641 – Public Money, Property or Records
6
Office of the Law Revision Counsel. 18 USC 208 – Acts Affecting a Personal Financial Interest
7
Office of the Law Revision Counsel. 18 USC 205 – Activities of Officers and Employees in Claims Against and Other Matters Affecting the Government
8
DoD. DoD Directive 5500.07 Ethics and Standards of Conduct
9
Office of the Law Revision Counsel. 50 USC 4025a – Portability of Professional Licenses of Servicemembers and Their Spouses
10
IRS. Self-Employment Tax (Social Security and Medicare Taxes)
11
Military OneSource. Working in the Gig Economy: Taxes on Self-Employment
12
National Archives. Executive Order 10096
13
Department of Defense. Updated Guidance on Application of the Procurement Integrity Act and Regulation