What businesses are eligible for certification?
To be eligible for State or Federal certification, businesses and business owners need to meet the following criteria:
- Be for-profit
- Be a small business
- Be socially and economically disadvantaged.
- Own at least 51% of the business, and show contribution of capital or expertise.
- Control the management and day-to-day operations of the business.
Each of these factors is discussed in detail below.
The Federal Small Business Enterprise (SBE) Certification is unique, and does not require an owner to show social disadvantage. However, they must meet all the remaining certification criteria.
There are also a few differences in eligibility between State and Federal certification, which are discussed at the bottom of the page.
What is a for-profit business?
A for-profit business is a company that is created to make money. Only for-profit businesses are eligible for certification. Charities and other non-profit entities cannot be certified.
What is a small business?
Businesses must be small to be eligible for certification. A small business is a business that meets the U.S. Small Business Administration (SBA) size standards for small businesses, and an overall business size limit:
- An overall business size standard of $30.4 million in gross receipts over a three-year average.
- Size standards according to your businesses’ North American Industry Classification System (NAICS) codes. OMWBE will assign your business NAICS codes according to the goods and services you indicate your business will provide. Each NAICS code has a size standard listed in the SBA’s size standard tables. For more information on size standards, and for SBA’s size standard tables, please click here.
Who is Socially and Economically Disadvantaged?
To qualify for certification, the primary owner(s) must be both socially and economically disadvantaged.
A socially disadvantaged individual is a person subjected to racial or ethnic prejudice or cultural bias within U.S. society because of their identity as a member of a group stemming from circumstances beyond their control. All certifications except the Federal SBE certification need to show this.
Some persons are presumed to be socially disadvantaged. For certification purposes, those persons are members of the following groups: Women, Black/African Americans, Hispanic/Latinos, Native Americans, Native Alaskans, Asians, Pacific Islanders, or Native Hawaiians.
Other persons who are not members of these groups may provide evidence of social disadvantage. These applications are evaluated on a case-by-case basis, and must include all of the following elements:
- At least one objective distinguishing feature that has contributed to social disadvantage.
- Personal experiences of substantial and chronic social disadvantage in American society.
- Negative impacts on entry into business or advancement in business.
An economically disadvantaged individual is a person whose ability to compete in business has been impaired due to diminished capital and credit opportunities, as compared to others in the same or similar line of business who are not socially disadvantaged. All certifications, including Federal SBE, need to show this.
- The owners’ personal net worth generally may not exceed $1.32 million. This does not include equity in the owners’ personal residence or business for which the person is applying for certification
- There are circumstances where an applicant’s personal net worth does not exceed $1.32 million, but OMWBE determines the person is not economically disadvantaged. The agency would make this determination if the statement of personal net worth and supporting documents demonstrate the individual is able to accumulate substantial wealth. Factors include:
- Adjusted gross income over the last three years is over $350,000. The agency takes into consideration if this income was usual and likely to occur in the future, if the earnings were offset by losses, and if the income was reinvested in the firm or used to pay business taxes.
- The total fair market value of the owner's assets exceed $6 million, including the applicant business and the owner’s primary residence.
- Other evidence that income is not indicative of lack of economic disadvantage.
For more information on personal net worth, please click here
What are contributions of capital or expertise?
Contributions of capital or expertise are money, equipment, or special skills that the company owner used to start or acquire the business. Business owners seeking certification need to show that they made these contributions to acquire 51% or more of their business.
Capital contributions are money, equipment, or other items of value that the owner used to start or purchase the business. Owners need to show their contributions and prove they are proportional to the amount of the business they own.
Contributions of Expertise
Contributions of expertise are allowed in some special circumstances if owners also made a capital contribution. Merely working for the company is not sufficient. If owners acquired their company through a contribution of expertise, they must show:
- their expertise is in a specialized field
- is of outstanding quality
- in areas critical to the firm's operations
- indispensable to the firm's potential success
- specific to the type of work the firm performs; and
- documented in the records of the firm.
What control of the company is required?
To be eligible for certification, owners must show managerial and operational control. This means they can control both the high-level decision making and the day-to-day operations of the company. Control does not look the same for every business, and what a business owner must show changes depending on the industry and who else is involved. However, in all cases the owner must show the following:
- The business is independent and does not overly rely on any other business to function
- That the owner is the highest officer of the company
- The owner controls other company partners, members, or the board or directors
- An overall understanding of the type of work the company performs, including managerial and technical competence and experience directly related to the company’s work
- The business has the necessary staff and equipment to perform its work
Please contact our office if you have any specific questions. We can be reached at 360-664-9750 or via email at email@example.com.
What are the eligibility differences between State and Federal Certification?
While the certification criteria for State and Federal Certification are almost the same, there are a few key differences.
For Federal Certification, businesses located outside of Washington State must first seek certification by their home state before applying in Washington. Additionally, owners must prove they are U.S. Citizens or lawful permanent residents to be eligible.
For State Certification, businesses must obtain all the licenses and registrations to do business in Washington State before applying for certification. This includes registering your company with the Washington Secretary of State, and obtaining any specialty licenses your business may require before applying.
If you have any further questions, please contact us at 360-664-9750 or via email at firstname.lastname@example.org.