Getting DBE Certified When Your Business Partner is Not Disadvantaged.
Over 90% of people who call us about being denied DBE certification have been denied because they are in business with someone who is not socially and economically disadvantaged. A person can be non-socially and economically disadvantaged because they exceed the Personal Net Worth requirement of $1.32 million or the person is not a member of one of the presumptive groups of socially and economically disadvantaged individuals. In many cases the business partner is also a relative, spouse, brother etc. of the person claiming social and economic disadvantage status. Luckily, the regulations governing the DBE program allow you to be in business with non-socially and economically disadvantaged individuals with one caveat: that person cannot be seen to control the DBE company. That’s where most people who get denied run into trouble. Below are some tips if you are in business with someone who is not socially and economically disadvantaged:
Make sure you are the highest ranked individual in the company and make sure you are the highest paid individual. You should not be denied certification if you are not the highest paid person, but make sure you have a good explanation.
Make sure you have the technical expertise to run the business. If your business is construction you have to the experience and expertise to run the business. If you own a trucking business, you need to be able to drive the truck. Handling the office work, book keeping, and payroll alone is not considered controlling your business.
If you started the business with your spouse who is not socially and economically disadvantaged and you used funds from a joint bank account DO NOT apply for DBE certification with out first contacting us. You will need an agreement whereby your spouse relinquishes any interest in your portion of the business. Without out this agreement your certification will be denied.
Make sure you have someone who understands the DBE program (preferably a lawyer) review your corporate documents. Even if you own a controlling share of your company, your corporate documents may say differently or give your partner too much power in the eyes of the person reviewing your application.
Make sure that there are no outstanding loans from your partner or agreements that can give the partner control of your company.
If you are in any of the situations described above, contact us immediately. We can often help you resolve these issues before you apply for certification. It’s much more difficult to help after you’ve been denied.
Disclaimer The above are suggestions are meant to help you in the event you decide to seek DBE certification. It is not legal advice. If there is any question at all about your chances of achieving certification you should refer to the DBE regulations at 49 CFR part 26 or contact your local small business office. You may also call me at (786) 271-6166 for a free 15 minute consultation.