Make no mistake about it, going through the certification process to achieve Women Business Enterprise, Minority Business Enterprise and/or Disadvantaged Business Enterprise certifications can be an overwhelming experience. Many businesses are intimidated by the application process and perceived time commitment. This blog post will address a few of the issues that I see when assisting my clients with the application process.
Getting your business paperwork in order
Many of my WBE/MBE/DBE clients are first referred to me to review and update their corporate paperwork. This includes operating agreements for LLCs or bylaws for corporations.
In reviewing your application, the certifying organization will be closely scrutinizing your corporate paperwork to ensure that the person or persons who are women, minority or disadvantaged individuals have absolute control over the company. For many small businesses, this hasn’t been an area of concern in the past. Some businesses download their corporate formation documents from a website (do-it-yourself) or they may have had an attorney prepare the documents. However, it is likely that when the business was formed, certification was not on the mind of the drafting party. Many drafters (when they be attorneys or lay people) do not have an appreciation of how the language in these documents can help or hurt the company down the road if they seek certification.
In short, the women, minority and/or disadvantaged owner must have absolute control over the company. In many form operating agreements, there are provisions requiring a “supermajority” to approve certain actions. These provisions will be frowned upon during the certification process. It may also surprise some majority owners that they not control the company as they had previously thought.
There may be uncomfortable conversations
I frequently see businesses where there is a woman that owns 51% of the business, with one or more men owning the remaining percentage. It may be a father, husband, sibling or just a business partner. The company realizes that the woman is the majority owner and that their business would benefit from the certification. However, as this blog has already mentioned, the majority owner seeking the certification must have absolute control over the business. Perhaps the owners split decision making previously. However, if the company seeks certification, it will likely have to make some adjustments to those roles and who may make certain decisions.
I have seen a number of potential applicants for certification turn away from the process once this discussion took place. Those individuals either don’t want to have these conversations, or fear that it will damage a relationship. I have also seen other applicants (for instance, where the owners were a married couple) where this discussion and these changes went off without a hitch.
As an attorney, I am used to having uncomfortable conversations with my clients about potentially unpleasant or upsetting topics. I can serve as someone outside of the business relationship to explain why this is necessary, how the company will benefit and how the success of the company benefits all of the owners of the company.
It is going to get personal
The application process will require you to reveal what many of us consider to be private information. Tax returns (business and/or personal, depending on how long your business has existed), personal net worth statements, birth certificates or passports are just a few.
If you acquired your company from someone else, you will have to be able to show how you acquired it, who paid for what, and prove that you are really the one running the business. These can be some of the more challenging certification applications to guide clients through. It can be very frustrating to clients to be questioned in such detail, and some get offended that the certifying agency can’t just take their word for it. It is important to remember during the certification process that the agency is trying to make sure that no one is improperly taking advantage of the certification. The stringency of the process strengthens the value of your certification.
Don’t give up
It can be a long process or you may be frustrated. Obtaining your certification can be a big step in marketing your business. If you are considering certification, please contact me to set up an initial consultation to discuss whether it is right for you and what the process will involve.
Danielle Dietrich is an attorney at Tucker Arensberg’s that assists business owners with their legal needs. She is licensed to practice law in Pennsylvania, Ohio and West Virginia. Danielle can be reached via email; telephone: 412-594-5605 or on Twitter at @DLDietrich.