What Is a Minority Business Enterprise and Why Should I Care?
The United States is a melting pot of cultures and people. Since 1972, a private organization known as the National Minority Supplier Development Council (“NMSDC”) has promoted this diversity by encouraging the growth of businesses owned by ethnic minorities.
Although some minority-owned businesses self-identify, the term “Minority Business Enterprise” (“MBE”) generally refers to businesses that have been certified by the NMSDC through one of its regional offices. For much of its history, the NMSDC received funding from the federal government. Currently, however, the NMSDC is an entirely private organization that oversees a national network of 38 regional offices in 29 states.
Certification has a number of advantages. Many government agencies and large corporations have launched initiatives to do business with minority-owned companies. When your application is accepted, your business is listed in the NMSDC’s database of minority-owned suppliers and companies. That database allows corporate entities and government agencies to connect with members. Most regional certification offices also provide their members with additional benefits, such as state resources and community support.
Additionally, several federal government agencies, such as the EPA, certify minority-owned businesses. Because these agencies also accept NMSDC certification as valid, applying for certification through the NMSDC is a relatively easy way to obtain MBE designation across the board.
Do I Qualify as a Minority Business?
According to NMSDC guidelines, a minority-owned business must be at least 51 percent owned, operated, and controlled by one or more members of an ethic minority. These ethnic minorities include Asians, Hispanics, Native Americans, and African Americans. All applicants must be United States citizens.
The NMSDC program defines minorities as individuals who claim at least 25 percent minority heritage in one of the four ethnic groups. Those with 25 percent minority ethnicity must provide the NMSDC with proof of their heritage.
Per NMSDC guidelines, individuals whose ethnic heritage hails from following global regions do not qualify as minorities for MBE purposes:
- The Iberian Peninsula (Spain and Portugal)
- Asia Minor
- The Persian Gulf (Iran, Iraq, and Saudi Arabia)
- North Africa (Egypt, Libya, Algeria, and Morocco)
The NMSDC also accepts both privately-owned and publicly traded companies. If a business is publicly-owned, at least 51 percent of its stock must be minority-owned. Additionally, minorities must control its daily operations. Start-ups and home-based businesses also qualify for MBE certification.
MBE Certification for California Businesses
The NMSDC maintains three regional offices in the state of California. Business owners who wish to obtain MBE status can apply through the Southern California Minority Supplier Development Council, the Northern California Minority Supplier Development Council, or the San Diego Regional Minority Supplier Development Council.
To apply, companies must register with the appropriate regional office. Each office features a website with a map that allows potential members to determine whether their company falls within that office’s geographical area. The application asks the prospective member a variety of questions about the business, including the number of employees, the annual revenue, and the nature of its operations.
Business owners must also supply the regional office with proper documentation, which may include financial statements, articles of incorporation, corporate bylaws, a copy of the owner’s driver’s license, and lease agreements. Each office provides a document checklist for each type of business entity. The information requested for a limited liability company differs from that required of a sole proprietorship. Once the office receives the application and requested documentation, it conducts a site visit. This is a physical visit by a representative of the regional office.
Application fees vary depending on the size of the business. The initial certification cost ranges between $300 and $950. Annual recertification fees vary between $250 and $900. The certification process can take a number of months, so you should plan accordingly. You should also be aware that significant efforts are made during the certification process to ensure that the company truly is an MBE and that there is no attempt to manipulate the ownership or control of the company to obtain a sham certificate. The NMSDC will look carefully to determine that minorities have permanent offices and actually control the day-to-day operations.
There are also similar provisions for women-owned businesses which provide many of the same benefits as MBEs. Certifications for women-owned businesses can be obtained through a number of federal and state agencies. If you’d like to learn more about MBE or women-owned business certification, please contact Cohen Law Firm.
This article has been prepared by Cohen Law Firm for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.