By Cliff Ennicowww.succeedinginyourbusiness.com
“My husband and I started a consulting business a while back, and we are finding ourselves getting more and more business from government agencies and nonprofit organizations. There’s only one problem: many of these people want to know if we are a ‘minority-owned enterprise’ or a ‘female-owned enterprise’ so they can comply with federal and state laws requiring that a certain percentage of their business be given to minority or female owned contractors.
I am female and own 51% of the business. My husband and I are both members of recognized minority groups. Is that enough to qualify?”
In a word, “no”.
In order to qualify as a minority or female owned enterprise, you need to be “certified” as such by a recognized organization that provides such “seals of approval” as part of their mandate.
For female owned businesses, the “gold standard” for certification is the Women’s Business Enterprise National Council in Washington, D.C. (www.wbenc.org).
For minority owned businesses, the “gold standard” for certification is the National Minority Supplier Development Council in Washington, D.C. (www.nmsdc.org).
For purposes of NMSDC’s certification program, a minority group member is an individual who is a U.S. citizen who can provide documentation that he or she is at least 25% minimum Asian (either South Asian or Pacific Rim), Black, Hispanic or Native American.
Mere 51% ownership of a business by a woman or minority group member will not be enough to qualify for certification. The NMSDC also requires that minority group members control the management and daily operations of the business.
The WBENC certification criteria go further, requiring evidence that:
- The contribution of capital and/or expertise by the woman business owner is real and substantial and in proportion to the interest owned.
- The woman business owner directs or causes the direction of management, policy, fiscal, and operational matters.
- The woman business owner has the ability to perform in the area of specialty or expertise without reliance on either the finances or resources of a firm that is not owned by a woman.
If you are both a woman and a minority group member, it is advisable to apply for both certifications as some government agencies will prefer one over the other.
What if you are not a woman or minority group member but are disadvantaged in other ways (for example, you are physically handicapped or live in a poverty-stricken neighborhood)? The U.S. Small Business Administration, as part of its Section 8(a) Business Development program, provides certification for “socially and economically disadvantaged firms”. While companies owned by minority group members are presumed to qualify, the program also admits individuals with a net worth of less than $250,000 (excluding ownership of the business and their primary residence) if they show that they are disadvantaged because of race, ethnicity, gender, physical handicap or “residence in an environment isolated from the mainstream of American society”. For more information, see www.sba.gov/content/8a-business-development-0.
To participate in the Small Business Administration’s HUB (Historically Underutilized Business) contracting programs, a business must be determined to be a "qualified HUBzone small business concern". A firm can be qualified if:
- It is small,
- It is located in an "historically underutilized business zone" (HUBZone)
- It is owned and controlled by one or more US citizens, and
- At least 35% of its employees reside in a HUBZone.
To find out if your business is located in a “HUBZone”, go to www.sba.gov/content/hubzone-maps.
What if you are a disabled veteran? The law defines a disabled veteran as a United States military, naval or air service veteran with a service related disability of at least 10 percent.
For a firm to be certified as a “Disabled Veteran Business Enterprise,” it must be certified by the U.S. Veterans Administration (for details, see www.vetbiz.gov), and meet the following legal requirements:
- It is a sole proprietorship or partnership at least 51 percent owned by one or more disabled veterans or, in the case of a publicly owned business, with at least 51 percent of its stock owned by one or more disabled veterans; a subsidiary which is wholly owned by a corporation in which at least 51 percent of the parent company’s voting stock is owned by one or more disabled veterans; or a joint venture in which at least 51 percent of the joint venture’s management, control and earnings are held by one or more disabled veterans.
- One or more disabled veterans control the management and daily control of the daily business operations.
- The disabled veteran(s) exercising management and control need not be the same disabled veteran(s) who own the firm.
- It is a sole proprietorship, partnership or corporation with its home office located in the United States and is not a branch or subsidiary of a foreign corporation, firm or business.
Some state and local governments have their own certification programs, and will require your business to be certified locally. MWBE Enterprises Inc. publishes an “insider’s how-to” guide containing all of the official instructions for certification in each state, along with application forms (available for $72.89 from www.mwbecertification.com). The same firm also provides consulting services for companies seeking certification as minority or female owned enterprises (see www.mwbe-enterprises.com/services for details).
Cliff Ennico (www.succeedinginyourbusiness.com), a leading expert on small business law and taxes, is the author of “Small Business Survival Guide,” “The eBay Seller’s Tax and Legal Answer Book” and 15 other books. Permission granted for use on DrLaura.com