One way that fledgling construction companies can gain success is to become certified. Certification as a Disadvantaged Business Enterprise (DBE), Women-Owned Business Enterprise (WBE), or a Minority-Owned Business Enterprise (MBE) can result in obtaining government construction contracts. This is because federal law mandates that a certain percentage of contract work be allocated to certified companies. Additionally, a growing number of private companies have established programs where work is contracted to certified companies.
To obtain certification as a DBE, MBE or WBE, the ownership, management or control of such a company must be at least 51 percent disadvantaged, minority or women, depending on the applicable certification.
Once the proper certification is obtained, it must be renewed on an annual basis. This means that as the company grows and evolves, it must continue to comply with the guidelines expected of such businesses. For example, in order to be certified as a DBE, the majority owner or managing member must have a personal net worth of less than $1.32 million. If an owner in the business sells their share, this may boost the majority owner’s personal net worth past the required threshold, and could jeopardize the company’s certification.
As such, proper planning is essential in maintaining certification, and the preceding example is only one way that certification could be lost. If you have questions about establishing a construction company as a DBE, MBE or WBE, an experienced attorney can advise you.
The preceding is for informational purposes only and does not establish an attorney-client relationship.