Control is not the same as ownership. For example a disadvantaged individual may own 51% of the business that is applying for 8(a) Certification but they may be found to not unconditionally control the company by the SBA.
As defined by the SBA in CFR 124.106, the SBA regards control as including both the strategic policy setting exercised by boards of directors and the day-to-day management and administration of business operations of the business.
In order to be found to control the business, here are the following requirements.
1. The disadvantaged individual must manage the daily business operations (Except for concerns owned by Indian tribes, ANC’s, NHO’s or CDC’s)
2. The disadvantaged individual must have managerial experience of the extent and complexity to run the business.
3. The disadvantaged individual need not have the technical expertise or possess the required license to be found to control the business if he or she can demonstrate that he or she has ultimate managerial control over those who possess the required license or technical expertise. However – where a critical license is held by a non-disadvantaged individual have an equity interest in the business, the non-disadvantaged individual may be found to control the business.
4. The disadvantaged individual must work full-time in the business, without any outside employment. In addition, the disadvantaged individual must devote full-time during the the normal working hours of the business. If the disadvantaged individual works in a wholly owned subsidiary of the business this full-time devotion may be considered to meet the requirement of full-time devotion.
5. The disadvantaged individual must hold the highest officer position in the business. (Usually President or CEO)
6. The disadvantaged individual must be physically located in the USA.
7. If the business is a partnership, the disadvantaged individual must serve as the the general partner with control over all partnership decisions.
8. If the business is a limited liability company, the disadvantaged individual must serve as management members with control over all decisions of the LLC.
9. If the business is a corporation, the disadvantaged individual must control the Board of Directors. See CFR 124.106 for Board of Director Control requirements.
10. No non-disadvantaged individual or immediate family member may be a former employer or principal of any disadvantaged individual, unless the relationship between the former employer or principal and the disadvantaged individual does not give the former employer actual control or the potential to control the business and such relationship is in the best interest of the business.
11. The disadvantaged individual must be the highest compensated individual.
12. Non-disadvantaged individuals who transfer the majority ownership or control of the firm to an immediate family member, within two years prior to the 8(a) Application and remain involved in the firm are presumed to control the firm.
13. The disadvantaged individual must be a guarantor of any critical financing or bond, if required.
14. Business relationships that exist with non-disadvantaged individuals or entities which cause economic dependence will cause a control issue.
Have additional Questions? or want to get started on your SBA 8(a) Application?
With 20 years and over 3,000 successful applications under our belt, we can assure you that no matter which option you choose, Cloveer will work harder and faster to get your business SBA 8a certified. Contact us today at 813-333-5800 or visiting our website at www.cloveer.com to discover what Cloveer can do for you. We also offer these options for further assistance in completing your 8(a) Application.
Option 1 – 8(a) Application Review
- For those who wish to complete the application on their own we offer an 8(a) Application Review service. Here, one of our 8a program experts will review your entire application, checking it for missing documents and potential eligibility issues. We will then advise you as to how best to modify your application to ensure it will be approved an SBA reviewer.
Option 2 – 8a Application Completion Service
- The majority of our clients however, prefer a little more of a hands-on approach. They recognize the expertise we have accumulated in the over 20 years we’ve been assisting clients obtain 8(a) certification, and want us to put it to use for them. If you opt for our 8(a) Application Completion Service, we will work one-on-one with you to ensure that your 8(a) Application is 100% complete and compliant so the SBA can review and accept it the first time.