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February 18, 2021

Women Owned Small Business Certification Program - Part One: Requirements

Business Owners2020 brought uncertainty to the world and, for many businesses, financial instability. In addition, 2020 brought inequities and disparities in our society to the forefront. To address both of these issues, many businesses are striving to achieve increased diversity in the workplace, while simultaneously seeking additional opportunities to secure financial opportunities.

One way to open the door to more business opportunities for women and minority owned and managed businesses is to investigate the benefits of Women Business Enterprise (“WBE”) or Minority Business Enterprise (“MBE”) certification. There are many certification agencies and organizations available including federal WBE and MBE certification programs, as well as state, county and city certification programs. There are also non-government organizations that provide WBE and MBE certification. Some of the most widely known are the Women’s Business Enterprises National Council (“WBENC”) and the National Minority Supplier Development Council (“NMSDC”), both of which are non-profit entities.

For a business to become certified, there is often an application process and a formal determination, but some agencies may permit self-certification. WBE/MBE certification can be a valuable asset for a business as it can bring more customers and business, along with other additional benefits. Your business should base its decision on what certifying agency to apply to by determining which specific certification from a particular agency or organization will generate more customers, business and ultimately profitability to your company. For example, for some industries, Disadvantaged Business Enterprises (“DBE”) certification is preferred for women and minority owned businesses. However, DBE certification has a not-to-exceed personal net worth standard and other requirements.

Identifying the appropriate certification(s) requires “due diligence.” Your business should determine from your customers or target customers what particular certifications are necessary or helpful to obtain their business (for example: WBE, DBE, WOSB, etc.) and what specific agencies or organizations you should apply to for that certification (Department of Transportation, WBENC, various state, county and city agencies and departments, etc.). Once you have this information, we can help you develop a plan to meet your business needs.

This article explores Women Owned Small Business (“WOSB”) certification through the U.S. Small Business Administration (“SBA”).

The WOSB certification program with the SBA may be one opportunity for your business to make progress towards financial stability. This two-part series on WOSB will focus first on the eligibility requirements for a WOSB, and Part Two will focus on the application process for certification and the benefits of certification.   Later posts will look at other types of certifications.

A business is permitted to apply for certification at any time that it meets the eligibility requirements below. The business must:

  1. Qualify as a small business. In order to qualify as a small business, the business must meet the definition of “small business” provided in 13 CFR 121. That section of the regulations provides a list of primary industry classifications and limitations on total annual receipts by industry classification.
  2. Be 51% or more unconditionally and directly owned and controlled by one or more women who are United States citizens.​​​​​​
  1. Ownership
    1. To be considered unconditional, the ownership of the qualifying woman must not be subject to any conditions, executory agreements, voting trusts, or other arrangements that cause or potentially cause ownership benefits to go to another person.
    2. To be considered direct, the qualifying woman must own 51% of the business directly. That means the ownership cannot be through a trust or another business.
  2. Control
    1. Control means that the qualifying woman has control of the management and daily business operation of the business – this includes both long term decision making and day-to-day management of the business.
    2. The qualifying woman must occupy the highest officer position in the business and have the managerial experience to the extent and complexity required to run the business.
    3. The qualifying woman who holds the highest officer position of the business must manage it on a full-time basis and devote full-time to the business concern during the normal working hours of the business.
    4. Control in a LLC additionally means that the qualifying woman has control of all decision of the LLC.

Please note that there is an additional certification program for economically disadvantaged women owned businesses. In general, to qualify as economically disadvantaged the owner’s personal net worth must be $750,000 or less.

Please note it is only proper to file for certification if all of the requirements outlined above are met at the time of filing and continue to be met after filing. Applicants must attest the truth and accuracy of the filings submitted to the SBA.

The next post in this series will discuss how businesses that meet the WOSB requirements may register for certification and the benefits of certification.

If you are interested in discussing the possibility of applying for a WOSB certification with the SBA, please contact one of the authors of this article.

Categories: Did you Know?

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