Matters Column

How to qualify as a woman-owned small business

March 24, 2017
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The Women-Owned Small Business Federal Contracting Program, established in February 2011 through the U.S. Small Business Administration, was designed to provide women-owned small businesses and economically disadvantaged women-owned small businesses with assistance in competing for business with the federal government.

Under the program, federal contracts are set aside in industries in which women-owned small businesses are underrepresented, and the women-owned small businesses compete for the available contracts. Similarly, federal contracts are set aside in industries where economically disadvantaged women-owned small businesses are underrepresented, and economically disadvantaged women-owned small businesses can compete for the available contracts.

The program — which is similar to federally supported programs for such individuals as service-disabled veterans — has the potential to be a boon to women who wish to succeed in business endeavors. 

To be certified as a women-owned small business and compete for the many federal government contracts set aside for women-owned small businesses, a business must satisfy the following requirements:

  • The business must be at least 51 percent unconditionally and directly owned by women who are United States citizens.
  • The management and day-to-day operations of the business must be managed by women.
  • The individuals who make long-term decisions for the business must be women.
  • The highest officer position in the business — such as that of president or chief executive officer — must be a woman, and the woman must work on a full-time basis during normal business hours. In addition, the woman holding the highest officer position may not have outside employment that compromises her ability to manage the business on a full-time basis.
  • The business must be considered a “small business.” The requirements for being considered a “small business” obviously will vary depending on the type of industry in which the business operates and the contract the business is competing on.

To be certified as an “economically disadvantaged” women-owned small business, the business must meet all of the requirements to qualify as a women-owned small business. In addition, the woman who owns and controls the business and holds the highest officer position must be considered “economically disadvantaged” under the Small Business Administration regulations.

Whether or not an individual is considered economically disadvantaged will be determined on a case-by-case basis. However, if any of the following factors is true, she will automatically be disqualified:

  • The woman’s personal net worth — excluding her ownership interest in the business and her primary residence — is $750,000 or more.
  • The woman’s adjusted gross yearly income when averaged over the three years prior to certification is $350,000 or more.
  • The fair market value of all of the woman’s assets is $6 million or more.

If you think your business could qualify as a women-owned small business or as an economically disadvantaged women-owned small business, then you must go through the certification process, either through self-certification or through one of the following four Small Business Administration-approved third-party certifiers:

  • The El Paso Hispanic Chamber of Commerce
  • The National Women Business Owners Corporation
  • The U.S. Women’s Chamber of Commerce
  • The Women’s Business Enterprise National Council

To receive more detail regarding the certification process, visit “What You Need To Know if You Are a Women Owned Small Business” on the Small Business Administration’s website.  There you will find additional information not only about the certification process but also about the program in general.

It is important to keep in mind the Women-Owned Small Business Federal Contracting Program is just one of a number of programs established under state and federal law to help women-owned businesses compete in industries in which they have been historically underrepresented. There also are a number of programs that are available for businesses owned by minorities or by other socially and economically disadvantaged individuals.

One such program in the state of Michigan is the Michigan Department of Transportation’s Disadvantaged Business Enterprise Program. This program is available to provide assistance to businesses owned by women, minorities and other socially and economically disadvantaged individuals that compete for federally funded Michigan Department of Transportation contracts. Additional information about this program can be found on the MDOT website.

Even in situations where your business does not meet the qualifications under the Women-Owned Small Business Federal Contracting Program established by the U.S. Small Business Administration, keep in mind — if the business still is owned by women, minorities or other individuals who are considered socially and economically disadvantaged — then you still are well-advised to contact qualified legal counsel to determine whether your business can participate in and take advantage of other available programs.

Kristen M. Veresh is an attorney with the law firm of Varnum LLP.  Her practice focuses on corporate matters, including finance. She can be reached at Varnum's Novi, Michigan office at kmveresh@varnumlaw.com

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