By Cliff Ennico
“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 ‘woman-owned enterprise’ so they can comply with federal and state laws requiring that a certain percentage of their business be given to minority- or woman-owned contractors.
“I am female and own 51 percent of the business. My husband and I are both members of recognized minority groups. Is that enough to qualify?”
Believe it or not, the answer may well be “no” — at least for a female-owned business.
In order to qualify as a minority- or woman-owned enterprise, you need to be certified as such by a recognized organization that provides seals of approval as part of its mandate.
For woman-owned businesses, the gold standard for certification is the Women’s Business Enterprise National Council (WBENC) in Washington, D.C.
For minority-owned businesses, the gold standard for certification is the National Minority Supplier Development Council (NMSDC) in Washington, D.C.
For purposes of NMSDC’s certification program, a minority group member is an individual who is a U.S. citizen and can provide documentation that he or she is at least 25 percent minimum Asian (either Asian Indian American or Asian Pacific American), black, Hispanic or Native American.
Mere 51 percent 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 daily management and operations of the business.
The WBENC certification criteria go further, requiring the following evidence:
• The contribution of capital and/or expertise by the female business owner is real and substantial and in proportion to the interest owned.
• The female business owner directs or causes the direction of management, policy, fiscal and operational matters.
• The female 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. While you should clearly qualify as a minority-owned business, you may not meet the WBENC requirements for a woman-owned business if your husband actually runs things.
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 his or her 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 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 (by SBA standards).
• It is located in a “historically underutilized business zone” (HUBZone).
• It is owned and controlled by one or more U.S. citizens.
• At least 35 percent 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 ground, naval or air service veteran with a service-related disability of at least 10 percent.
The U.S. Veterans Administration provides certification as a veteran-owned or disabled-veteran-owned enterprise through its Office of Small & Disadvantaged Business Utilization and private certification can be secured through organizations such as the National Veteran-Owned Business Association. To qualify, a company must 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 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. For example, both New York State and New York City have their own requirements for certification. MWBE Enterprises Inc., a for-profit consultancy, provides consulting services for companies seeking certification as minority- or woman-owned enterprises (see www.mwbe-enterprises.com for details).
Cliff Ennico (crennico@gmail.com) is a syndicated columnist, author and former host of the PBS television series “Money Hunt."
COPYRIGHT 2019 CLIFFORD R. ENNICO.
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