What it takes to become a certified woman-owned business
Female business owners may have a leg up in increasing the profitability of their businesses and expanding into new markets. Certified woman-owned businesses can set themselves apart in the marketplace by taking advantage of government and private industry programs aimed at increasing diversity and promoting women in business by setting goals to award contracts to woman-owned businesses.
Eligibility for programs targeted at woman-owned businesses generally requires certification. Several organizations offer certification, and each business should identify which organization offers the certification the business needs. For example, the National Women Business Owners Corporation offers third-party national certification that complies with many woman-owned business programs, while the California Public Utilities Commission Clearinghouse offers certification for companies seeking to do business with California public utility companies.
Certification requirements
Despite the number of organizations offering certification, the standards required for certification are similar. Generally, the business must be owned at least 51 percent by women and have at least one female owner control the management and operation of the business.
Ownership and control are the critical barometers for determining whether a company is eligible for woman-owned business certification. Ownership can be established through the legal formation documents but should be supported by real and substantial contributions of capital or expertise by the women owners, sufficient to acquire their interest.
The ownership and control by women must be real, substantial and continuing and go beyond a pro forma façade of ownership. At least one woman owner must make management decisions and oversee day-to-day operations, including having the authority to sign key contracts, make employment decisions, determine strategy, oversee finances and act as a point of contact for third parties.
As an important element of proof, women owners must be able to demonstrate the experience and education necessary to perform their duties, consistent with the relevant industry standards. At least one woman owner must be a full-time manager holding the position of president or CEO.
Lengthy process
Certification as a woman-owned business is important because some companies will require certification before bestowing the privileges associated with woman-owned business status. Certification is not easy and can be a lengthy process. A prospective applicant for certification should ensure that the business’ operative documents support unequivocal majority ownership by the female leaders. The female owners must also provide information sufficient to show that they are qualified to run the business and are not merely acting as figureheads.
Common application requirements also include providing detailed business information including governance information, contracts, correspondence, business licenses, résumés of all owners, financial statements (including debt instruments and copies of bank signature cards), and employee information.
Additionally, applicants will have to complete an application, enter into some sort of participation agreement, and prior to approval, a site visit of the business is often required. Once certified, a woman-owned business has ongoing obligations to remain qualified to use the certification and to seek periodic recertification.
Potential benefits
While the initial requirements may be onerous, the benefits can be tremendous. In California, some of the opportunities for woman-owned businesses include greater access to federal work through the SBA Women-Owned Small Business contract program, public utility contracts through the California Public Utilities Commission General Order 156 and some private contracts.
In addition to increased business opportunities, many certifications also come with special opportunities for loans and grants directed to woman-owned businesses and access to mentoring, education and networking opportunities aimed at bolstering the visibility and improving the quality of woman-owned businesses.
Woman-owned business programs set goals for awarding contracts to woman-owned businesses but are often criticized for falling short of expectations regarding the number of contracts actually awarded to woman-owned businesses. Despite the criticisms, the increased exposure and access to opportunities has the potential to turn a marginal business into one that is highly profitable.
First-time applicants for woman-owned certification might be wise to seek the assistance of knowledgeable legal counsel. Advice regarding potential pitfalls will typically cost less than the mistakes that might have been avoided.
Mia Rose Shirley (mshirley@frigolaw.com, 707-543-4900) is an associate attorney with Friedemann Goldberg, LLP. She focuses on banking, business and real estate law, and commercial litigation. Ms. Shirley advises on business formations, sales, including advising of woman-owned business, restructuring, certifications, disputes and contract review. She is a graduate of the University of California, San Diego, in mathematics and economics. She graduated cum laude from William & Mary School of Law.
