Women Owned Business Enterprise

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Women Owned Business Enterprise

Regional Partner Organizations (“RPOs”) are non-profit organizations which certify women-owned businesses for Women’s Business Enterprise National Council.  The RPOs rely on the Standards and Procedures Manual to make certification determinations.  The Standards and Procedures Manual is based on the regulations found in 49 Code of Federal Regulations Part 23 and 26.  This is a summary of the Standards and Procedures Manual.

In making the determination, RPOs look at all of the facts in the record and shall not deny an application simply because the female owner did not meet the ownership and control standards at some time in the past.  The current and future situation is all that matters.  Furthermore, a business will not be denied simply because it is a newly formed business.

The Manual defines a WBE as “an independent business concern that is at least fifty-one percent (51%) owned and controlled by one or more women who are U.S. citizens or lawful permanent residents, or in the case of any publicly-owned business, at least fifty-one percent (51%) of the equity of which is owned and controlled by one or more women who are U.S. citizens or lawful permanent residents; and whose management and daily operation is controlled by one or more of the women owners.”

Let’s take a more detailed look at the standards to become a WBE…

 

A. Ownership

  1. The ownership by women must be real, substantial and continuing.
  2. The applicant must share in all risk and profits commensurate with her ownership.   
  3. All ownership must be held directly by an adult woman, or held in an eligible trust.
  4. Contribution of Capital or Expertise:
    1. Contribution of capital and/or expertise to acquire ownership shall be real, substantial, and in proportion to the interest acquired.  Promises to contribute capital or expertise in the future to its business or other owners (including promissory notes) or the mere participation as an employee is not enough.
  5. Business Structures and ownership vehicles. Legal entities must be formed in and have their principal place of business in the United States or one of its territories.
    1. Corporation
      1. Women must own at least fifty-one percent (51%) of each class of voting stock and of all stock outstanding.
      2. Any voting agreements among the shareholders must not dilute the beneficial ownership, the rights, or the influence of the women owners.
      3. Women owners shall possess the right to transfer stock and enter into binding agreements on behalf of the company.
    2. Partnerships
      1. General Partnership. In a general partnership, women owners must own at least fifty-one percent (51%) of the partnership interests. In a limited partnership, the women general partners must own and exert control over at least fifty-one percent (51%) of the general partnership interest and the limited partnership interest and shall receive at least 51% of the profits and benefits.
    3. Limited Liability Companies
      1. In a Limited Liability Company, Women principal(s) must own at least fifty-one percent (51%) of the membership interests, and at least fifty-one percent (51%) of the management and control among the members.
      2. The women principals must also participate in all risks and profits of the organization at a rate commensurate with their membership interests.
    4. Certain trusts may also be accepted.  Refer to the manual for specific information.

 

B. Control. The applicant must show evidence that the woman or women owner(s) have control of the business. “Control” means the primary power to direct the management of a business enterprise as evidenced through the governance documents and actual day-to-day operation. The following factors will be examined in determining who controls an applicant:

  1. Governance
    1. 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/women business owner(s) from exercising “Managerial Control” (the demonstrated ability to make independent and unilateral business decisions necessary to guide the future and destiny of the business) and Operational Authority of the business.
    2. In reviewing governance documents and issues, special attention shall be given to:
      1. The composition of the business’s governing body (e.g., board of directors or management committee);
      2. The functioning of the governing body;
      3. The content of shareholder’s agreements, bylaws, operating agreements, partnership agreements or state incorporation statutes, and the extent to which such agreements, bylaw(s), or statutes affect the ability of the woman/women owner(s) to direct the management and policy of the business;
      4. A woman business owner or another such woman must hold the highest defined officer position in the company (i.e. President, Chief Executive Officer, Managing Member or Managing Partner, in each case by whatever title).
  2. Operation and management
    1. The woman or women owner(s) 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 woman or women owner(s).
    2. 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.
    3. In the event that the actual management of the business is contracted or carried out by individuals other than the woman or women owner(s), those persons who have the ultimate power and expertise to hire and fire the managers can, for this purpose, be considered as controlling the business.
    4. The woman owner or another such woman must hold the highest defined officer position in the company (i.e. Chief Executive Officer, President, Managing Member or Managing Partner, in each case by whatever title).
    5. The applicants must show evidence that the woman or women owner(s) have operational authority and managerial control of the applicant. In evaluating this evidence, the following factors will be considered:
      1. Operational Authority. “Operational Authority” means the extent to which the woman or women owner(s) 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 ascertain the level of operational control of the woman or women owner(s), the following will be considered:
        1. Experience: The woman or women owner(s) shall have education, demonstrable working knowledge and/or experience in the area of specialty or industry claimed in the certification application.
        2. Responsibility for Decision-Making: The woman or women owner(s) shall be able to demonstrate her role in making basic decisions pertaining to the daily operation of the business.
        3. Technical Competence: The woman or women 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 sufficient enough to critically evaluate the work of subordinates.
      2. Managerial Control. “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 or women owner(s) to demonstrate managerial control, the RPO will consider the following (not intended to be all inclusive) areas of routine business activity:
        1. The woman or women owner(s) must 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.
        2. Agreements for support services that do not impair the woman or women owner(s)’s control of the company are permitted as long as the owner’s power to manage the company is not restricted or impaired as determined by the RPO in its sole administrative discretion.
        3. Independence
          1. Performance
            1. The woman or women owner(s)’s expertise must be indispensable to the business’s potential success.
            2. The woman or 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-woman 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 include, but are not be limited to the following:
            1. Applicant’s relationship with a non-female company that involves any long-term contract or lease agreements.
            2. Applicant’s status as a party to any contract or lease agreement on terms at variance with industry standards or prudent business practices.
            3. Interlocking ownership of the applicant and non-woman business enterprise in the same industry.
            4. Common directors, officers, or members between the applicant and non-woman business enterprises.
            5. Applicant’s use of employees, equipment, expertise, facilities, etc., “shared” with or obtained from a non-woman owned company.
            6. The receipt by the non-women of financial benefits (i.e. profits, wages, etc.) shall be commensurate with the duties performed.
            7. An applicant’s business that cannot operate without licenses, permits and/or insurance held by another business is not independent. The business must possess all legal requirements necessary to legally conduct business.
            8. A Broker, Dealer, or Manufacturers Representative, unless it is the standard for the industry, generally does not qualify for certification.

 

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