Women-Owned Business Certification: A succession advantage

By April Hall

Certification as a women-owned business is a wise move for family firms planning to transition ownership to daughters. Certification enables a company to participate in various corporate supplier diversity programs and federal procurement programs. These programs, which provide for a certain percentage of their contracts to be awarded to businesses owned by women, generally require certification to ensure their female-led contractors are bona fide.

To be eligible for certification as a women-owned small business by the U.S. Small Business Administration (SBA), a firm must be “at least 51% directly and unconditionally owned and controlled by one or more women who are U.S. citizens.”

The federal government’s goal is to have 5% of its contracts awarded to women-owned businesses, according to the SBA.

The Women’s Business Enterprise National Council (WBENC), the largest third-party certifier of women-owned businesses for the private sector, says it has certified more than 14,000 women’s business enterprises in the U.S. Of those, WBENC certified 4,676 as women-owned small businesses.

WBENC president and CEO Pamela Prince-Eason says the council often works with family businesses. She says the process of certification can seem “document intensive,” but notes that doing business with corporations in general usually involves a comparable number of documents.

Family businesses that are owned in trust will have to submit trust documents to prove majority female ownership, as well as papers documenting the history of the company.

“When it comes to the company’s history, sometimes family lore takes over,” Prince-Eason says. “Someone will say it was established as a partnership, but was it 50/50 or 20/80?”

She suggests owners consult the WBENC website (www.wbenc.org) to learn more about applying for certification. Council staff walk businesswomen through each step and sometime serve as advisers in the process, she adds.

Corporations and government agencies need verification that they are doing business “with a women-owned, -operated and -controlled business,” Prince-Eason says. “They don’t want to find out later that it was just a shell company.”

Certified women-owned businesses can also take advantage of incentivized loan programs, training and networking opportunities. Some states also give tax incentives to contractors or subcontractors who use women- or minority-owned businesses for services.

Certification through a third party such as WBENC is not universally accepted. Companies seeking women-owned business designation should check with the particular government agency or company to verify what type of certification is necessary.