Criteria for WBE Certification
What is the criteria for WBE Certification?
At a minimum, the following standards will be used by the Women’s Business Development Center in determining whether a firm is an on-going business concern that is majority owned, operated and controlled by women, and therefore eligible to be certified as a Women Business Enterprise.
A. OWNERSHIP
The ownership by women must be real, substantial and continuing going beyond the pro-forma ownership of the firm as reflected in its ownership documents. The applicant must share in all risks and profits commensurate with her ownership interest as demonstrated by a detailed examination of the substance of her business arrangements with others. All securities that constitute ownership shall be held directly by the woman or women. No securities or assets held in trust are considered as held by women in determining the ownership of a firm with two exceptions:
- The beneficial owner of securities or assets held in trust is a woman and the trustee is the same woman or another such woman; or
- Assets held in a revocable living trust may be counted only in the situation where the same woman is the sole grantor and the same woman or another such woman is the beneficiary and trustee.
No securities held by any guardian for a minor shall be considered in determining ownership and control.
1. Corporation In a corporate form of organization, women principal(s) must own at least fifty-one (51%) of all voting stock of the corporation. Any voting agreements among the shareholders must not dilute the beneficial ownership, the rights, or the influence of the women owners of the stock or classes of stock of the corporation. Women owners shall possess the right to all customary incidents of ownership (e.g., ability to transfer stock, title possession, enter binding agreements, etc.). Nonprofit corporations do not meet this requirement and are therefore not eligible for certification.
2. Partnerships
In a partnership, two or more persons agree to carry on a business or venture together, upon the terms of mutual participation in its profits and losses. It is, in effect, a contract of mutual agency, each partner acting as a principal in her/his own behalf and as agent of his/her co-partners, and general rules of law applicable to agents apply with equal force in determining rights and liabilities of partners.
a. General Partnership
In a general partnership, women owners must own at least 51% of the partnership interests.
b. Limited Partnership
In a limited partnership, the women general partners must own at least 51% of the general partnership interest and exert at least 51% of the control among general partners. The women general partners must receive at least 51% of the profits and benefits, including tax credits, deductions and postponements.
In addition, the women limited partners must own at least 51% of the limited partnership interests and receive at least 51% of the profits and benefits, including tax credits, deductions and postponements.
3. Limited Liability Companies
In a Limited Liability Company (LLC), women principal(s) must own at least 51% of membership interest in the LLC organization, and at least 51% of the management and control among the members. The women principals must also participate in all risks and profits of the organization at a rate commensurate with their membership interests.
4. Sole Proprietorship
In a sole proprietorship, the woman must own 100% of the company assets.
B. CONTRIBUTION OF EXPERTISE AND/OR CAPITAL
Contribution of capital and/or expertise by women owners to acquire their ownership interest shall be real and substantial and be in proportion to the interest(s) acquired. Insufficient contributions shall include, but not be limited to; promises to contribute capital or expertise in the future; the mere existence of a note payable to the business or its owners who are not women; or the mere participation as an employee rather than manager/owner.
C. GOVERNANCE
The organizational and governing documents of an applicant (e.g. Limited Liability Company Operating Agreements, Partnership Agreements, or Articles of Incorporation and By-laws) must not contain any provision, which restricts the ability of the woman(s) business owner from exercising Managerial Control and Operational Authority of the business.
In reviewing governance documents and issues, special attention shall be given to whether (1) the composition of the business' governing body, (2) the functioning of the governing body, and (3) the content of shareholder's agreements, bylaws, or state incorporation statutes, and the extent to which such agreements, bylaw(s), or statutes affect the ability of the woman business owner to direct the management and policy of the business.
D. OPERATION AND CONTROL
The women must possess the power to direct or cause the direction of the management and policies of the business and to make the day-to-day as well as major decisions on matters of management, policy and operations. The business must not be subject to any formal or informal restrictions that limit the customary discretion of the women owners.
A previous and/or continuing employer-employee relationship between or among present owners are carefully reviewed to ensure that the female employee-owner has management responsibilities and capabilities.
In the event that the actual management of the business is contracted or carried out by individuals other than the women owner(s), those persons who have the ultimate power to hire and fire the managers can, for this purpose, be considered as controlling the business.
The applicants must show evidence that the women have control of the firm. In evaluating this evidence, the following definitions will be used:
1. Control
"Control" means the primary power to direct the management of a business enterprise
2. Operational Authority
"Operational Authority" means the extent to which the women actually operate the day-to-day business. Assessments of operational control will rest upon the peculiarities of the industry of which the business is a part. In order to clarify the level of operational control of the woman owner, the following will be considered:
a. Experience:
The woman owner(s) shall have education, demonstrable working knowledge and/or experience in the area of specialty or industry claimed in the certification application.
b. Responsibility for Decision-Making:
The woman owner(s) shall be able to demonstrate her role in making basic decisions pertaining to the daily operation of the business.
c. Technical Competence:
The woman owner(s) shall have technical competence in the industry or specialty of the applicant business and/or a working knowledge of the technical requirements of the business.
3. Managerial control
quote: “Managerial Control" is the demonstrated ability to make independent and unilateral business decisions necessary to guide the future and destiny of the business. Managerial control may be demonstrated in a number of ways. For a woman owner(s) to demonstrate the extent of her managerial control, the WBOP will consider the following (not intended to be all inclusive) areas of routine business activity:
a. In a corporate form of organization, by-laws must indicate clear female control of the Board of Directors and be free of restrictive language.
b. The woman should be able to produce documents that clearly indicate her control of basic business functions, e.g. authority to sign payroll checks and letters of credit, signature responsibility for insurance and/or bonds, authority to negotiate contracts and financial services.
c. Agreements for support services that do not impair the woman's control of the company are permitted as long as the owners power to manage the company is not restricted or impaired as determined by the WBOP in its sole administrative discretion.
E. INDEPENDENCE
1. Performance
The women owner(s) shall have the ability to perform in its area of specialty/expertise without substantial reliance upon finances and resources (e.g., equipment, automobiles, facilities, etc.) of males or non-women business enterprises.
2. Test of Independence
Recognition of the applicant as a separate and distinct entity by governmental taxing authorities shall not be a sole determinant of any applicant's assertions of independence. Test criteria includes, but is not be limited to the following:
a. Applicant's relationship with a non-female company that involves any long-term contract or lease agreements.
b. Applicant's status as a party to any contract or lease agreement on terms at variance with industry standards or prudent business practices.
d. Interlocking stock ownership of the applicant and non-women owned company in the same industry.
e. Common directors/officers between the applicant and non-women business.
f. Applicant's use of employees, equipment, expertise, facilities, etc., "shared" with or obtained from a non-woman owned company.
g. The receipt by the non-women of financial benefits (i.e., profits, wages, etc.) shall be commensurate with the duties performed.
h. An applicant's business that cannot operate without licenses, permits and/or insurance held by another firm is not independent. The firm must possess all legal requirements necessary to its operation.
F. DEFINITIONS FOR WORDS COMMONLY USED IN THE WBE CERTIFICATION PROCESS
See website for full list.
E. QUESTIONS ABOUT ELEGIBILITY?
It is very difficult to discuss one particular company’s eligibility for WBE Certification without reviewing a completed application with attachments. However, if you do have questions about the criteria and how it applies to your business, you can send an e-mail to certification@wbdc.org.
http://www.wbdc.org/tools/certify/certify_criteria.asp