Application Basics

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Group Membership Social Disadvantage Economic Disadvantage Business Size Ownership Control

Certification Standards

A Disadvantaged Business Enterprise (DBE) is a for-profit small business that is:

At least 51% owned by one or more individuals who are socially and economically disadvantaged

Managed, operated and controlled by one or more of the socially and economically disadvantaged owners

Certification Standards

Discussion and Questions

Certification Standards

Receive an application- Rule says certifying entity must request additional

information within 30 days after receipt of the application

90 days to complete application

A extension is allowed for no more than 60 days

- Written notice to explanation specific reasons for extension

Application Standards

Failure to timely process is constructive denial appealable to DOT

Keep files confidential notwithstanding State law

A DBE stays certified until its certification is removed through due process procedures in 49 CFR §26.87

- No “recertification” or “expiration” of certification

Application Standards

Discussion and Questions

Application Standards

Application Page 1

Cover Page: -Formal Introduction to Firm

-Date of Application

- Selection of Agency Submittal

Both parts under section one relates to Interstate Applications.The DBE program no longer automatically accepts SBA applications. MnUCP has elected not to accept home state

applications without independent review.- The MnUCP has 7 days to Request Onsite from the Home

State- The Home State has 7 Days to Provide Onsite to MnUCP

Section One

Certification Information

Applicant must send all documents Copy of home state application and all other

supporting documents Affidavits of No Change Other Related Correspondence Notices from other States about Application Status,

Denials and Decertification's Copy of any Certification Appeals with DOT Affidavit that all Information is True and Correct

Section One

Certification Information(cont’d)

MnUCP has 60 days from receipt of all applicant materials to certify firm

If within 60 days of receipt of all the applicants information the MnUCP finds good cause to object Home State certification, we must:

- Send Notice to Applicant of Specific Reasons for Determination- Offer Applicant Opportunity to Respond in either Writing or in

Person

Section One

Certification Information(cont’d)

The MnUCP must have meeting within 30 days of applicant’s request Applicant firm has Burden of Proof— Applicant need only address issues raised by MnUCP

The MnUCP must issue a written decision within 30 days of applicant’s written response or the meeting with a decision maker Applicant may appeal to Department of Civil Rights

Section One

Certification Information(cont’d)

Good Cause to Reject Evidence of fraud New information Certification factually erroneous or inconsistent with

regulations Laws of Minnesota require different result Applicant does not submit required documentation

Section One

Certification Information(cont’d)

Application Page 6

Section One:

Certification Information A: Prior/Other

Certifications B: Prior/Other Applications

and Privileges

Section Two:

General Information A: Contact Information B: Business Profile

Discussion and Questions

Section One Certification Information

A: Contact Information Applicant must complete the requested information for number

1-9.

B: Business Profile Applicant must complete the requested information for number

1-9. #1 Verify with Area of Work (page 16) #5 Can lead to additional questions and required documentation #7 Will determine the type of company documentation required

for certification #8 Can lead to additional questions and required documentation #9 Should be verified with the business tax returns

Section Two

General Information

Application Page 7

Section Two:

General Information B: Business Profile(cont’d)

C: Relationships with Other Businesses

D: Immediate Family Member Businesses

C: Relationships with Other Businesses Applicant must complete the requested information for

number 1-4. All of these questions can to additional questions and

required documentation

D: Immediate Family Member Businesses Applicant must complete the requested information This questions can to additional questions and required

documentation- Does the firm requesting certification have a regular business relationship with the family owned business?

Section Two

General Information(cont’d)

Application Page 8

Section Three:

OwnershipA: Background InformationB: Ownership InterestC: Disadvantaged Status

Discussion and Questions

Section Two General Information

A: Background InformationAll shareholders must complete this section (page 8)

Applicant must complete the requested information for number 1-8#6 Should be verified with Affidavit of Certification (page 13)

B: Ownership InterestApplicant must complete the requested information for number 1-7#2 Will require additional documentation of shareholders investment#4 Can lead to additional questions and required documentation

- Is the firm held as community property or jointly between a married applicants?

C: Disadvantaged StatusApplicant must complete the requested information for number 1-2#1 Should be verified with Personal Net Worth Statement

Section Three

Ownership

Disadvantaged Owner(s) Must:Maintain ownership of the majority shares of the firmProvide real and substantial contributions of capital Commensurate within the value of the firmIndispensable to firm’s successHave significant financial stake in firm also

- Ownership on basis of expertise is not allowedReflect contribution & value to firm

Section Three

Ownership(cont’d)

Take into Consideration:Assets obtained by disadvantaged individual through:

- Final divorce settlement- Inheritance because of death of former owner- Portion of assets or property held jointly or as community property if spouse renounces all ownership rights

Document renouncing must be submitted- Ownership transferred by spouse with adequate consideration

To overcome presumption applicant has burden of proof to demonstrate by clear and convincing evidence:

- Gift was made for reasons other than DBE certification- Disadvantaged individual

Loans from financial institutions Joint checking accountsExamine loans from family or friends

Section Three

Ownership(cont’d)

Presumed not acceptable: Gifts from any non-disadvantaged individual or non-DBE

firm who is- Involved in the applicant firm- Involved in same or similar line of business- Engaged in an ongoing business relationship with the applicant firm.

Promise to contribute capital Unsecured note payable to firm or owner not

disadvantaged Participation as an employee

Section Three

Ownership(cont’d)

Discussion and Questions

Section Three Ownership

Application Page 9

Section Four:

Control A: Officers and Board of

Directors

A: Officers and Board of DirectorsApplicant must complete the requested information for number 1-4#1 Verify every person listed completed section three (page 8)

#3 (listed as second #2) Can lead to additional questions and required documentation#4 Can lead to additional questions and required documentation

B: Management Personnel Applicant must complete the requested information for number 1-12

- Who controls the key tasks of the firm?

Section Four

Control

Application Page 10

Section Four:

ControlB: Management Personnel C: Inventory

C: InventoryApplicant must complete the requested information for number 1-4#1 Verify the ownership with bill of sale and/or title documentation#2 Verify the ownership with titles and insurance documentation#3 Verify with lease agreements and/or property ownership documentation#2 Verify with lease agreements and/or property ownership documentation

D: PayrollApplicant must complete the requested information for this question

Section Four

Control(cont’d)

Application Page 11

Section Four:

ControlC: Inventory (cont’d)

D: PayrollE: Financial Information F: Loans to Firm

E: Financial InformationApplicant must complete the requested information for number 1-2#1 Verify with bank signature card#2 Not all applicants will have bonding, majority will have liability insurance and that information could be listed.

F: Loans to FirmApplicant must complete the requested information for number 1-3

G: Contributions or Transfers of AssetsApplicant must complete the requested information for number 1-3

Section Four

Control(cont’d)

Application Page 12

Section Four:

ControlG: Contributions and TransfersD: Licenses and PermitsE: 3 Completed Projects F: 3 Active Projects

H: Licenses and Permits Applicant must complete the requested information for number 1-3#1-3 Will require additional documentation

I: 3 Completed Projects Applicant must complete the requested information for number 1-3#1-3 Request additional documentation to verify scopes of work

J: 3 Active ProjectsApplicant must complete the requested information for number 1-3

Section Four

Control(cont’d)

MnUCP must only certify independent firms as DBEs – 49 CFR § 26.71(b) Firm does not depend on another firm for sustainabilityDBE owners must control the day-to-day operations of the firmHave the power to make policy, personnel (hire/fire), decisionsDelegations permitted/must be revocable

Section Four

Control(cont’d)

Disadvantaged Owner(s) Must:Hold highest officer positionsControl board of directorsHas expertise/ability to intelligently and critically evaluate information presented by othersMaintain licensing as a requirement that is consistent with State law

- If State law requires person running firm to be licensed - If license not legal requirement presence or absence of license may be

considered in determining controlFirm controlled by family as group not eligible

Section Four

Control(cont’d)

Disadvantaged Owner(s) Must:Remains involved in the firmHave the burden of proof as the new owner, by clear and convincing evidenceOutside EmploymentNot have full-time job elsewherePart time work outside of firm, cannot conflict with ability to operate the DBE firmNot be an absentee disadvantaged ownership

Section Four

Control(cont’d)

Take into Consideration:Co-location with other firmShared personnel/equipmentSalaries of ownersNon-disadvantaged owners/employees also affiliated with non-DBE firmOwners of DBE firms with interests in other firmsPast employer/employee relationships with non-DBE firmsPattern of working for only one prime

Section Four

Control(cont’d)

Take into Consideration:Ownership of equipmentDisadvantaged owner ExpertiseOverall understanding of type of business Managerial and technical competenceRelevant experience and educationAbility to intelligently and critically evaluate information in firmAdministrative functions insufficientConsider all facts in record viewed as a whole

Section Four

Control(cont’d)

Discussion and Questions

Section Four Control

Sole Proprietorships Partnerships Corporations (C, S, Close) Limited Liability Corporations Limited Partnerships LLPs/Professional Corps. Trusts

Business Structures

Sole ProprietorshipFirm and owner are oneOwner owns and operates Don’t have to file formation documentsReport business profits as income on personal tax returns

ExamineLicense if necessary by lawExpertise/resume/previous employmentCurrent outside employmentPersonal tax returns for business size Equipment—titles, leasesLoans/financing

Business Structures

PartnershipsOwned by two or more individuals who own an interest Usually file business certificate. Partnership agreement is optional Owners pay taxes on share of business income on personal tax returns Terminates upon death or resignation of one partnerProfits found on personal tax returnsMust own 51% of each class of partnership interestMust be reflected in partnership agreement

Examine:Partnership AgreementCan significant decisions be made when disadvantaged owner is not present?Do decisions require concurrence by non-disadvantaged individual?Who has signature authority? Personal tax returns for business size

Business Structures

C Corporations Owner and company are two separate entities and allows unlimited

number of shareholders Business is an independent legal entity and is taxed separately from

owners. May have multi classes of stock and usually one vote per share of

stock Stockholders elect the Directors. Directors manage overall strategy of

the business Officers and under the direction of the Directors and manage day-to-

day business operations Required to have annual meetings with record keeping (minutes)

Examine Articles of Incorporation, Bylaws and Minutes with State. Trace firm’s ownership back Corporate tax returns to confirm business size requirements

Business Structures

S Corporations “Pass through” corporation, which the earnings are distributed to owners who report corporate profits on personal tax returns.Single class of stock, limitations on number of owners. Shareholders not usually held personally liable for business obligations, debts, or court ordered judgments. No stock ownership by corporations allowed.

ExamineArticles of Incorporation, Bylaws and Minutes with State. Trace firm’s ownership backCorporate tax returns to confirm business size requirements

Business Structures

TrustsOperate under Declaration of Trust Terminates upon the earlier of death of beneficiary or termination date of trust. Governed by Trustee as set forth in Declaration of TrustCan’t be owner of DBE, unless….If Applicant is owned by Trust examine Declaration of Trust:

- Beneficial owner and trustee must be disadvantaged persons; or- Beneficial owner must be disadvantaged AND exercise control of firm rather than trustee; or- Same disadvantaged person is grantor, beneficiary and trustee of revocable living trust.

ExamineThe Declaration of Trust

Business Structures

Limited Liability CorporationsA Limited Liability Company (LLC) is a business structure allowed by state statute. The IRS will treat an LLC as either a corporation, partnership, or as part of the LLC’s owner’s tax return A LLC with at least two members is classified as a partnership for federal income tax purposes An LLC with only one member is treated as an entity disregarded as separate from its owner for income tax purposes Owners of an LLC are called members. Most states do not restrict ownership and so members may include individuals, corporations and other LLCs.

Business Structures

Limited PartnershipsA limited partnership is a form of partnership similar to a general partnership, except that in addition to one or more general partners (GPs), there are one or more limited partners (LPs). It is a partnership in which only one partner is required to be a general partner.The same legal position as partners in a conventional firm, i.e. they have management control, share the right to use partnership property, share the profits of the firm in predefined proportions and have joint and several liability for the debts of the partnership.As in a general partnership, the GPs have actual authority as agents of the firm to bind all the other partners in contracts with third parties that are in the ordinary course of the partnership's business. As with a general partnership, "An act of a general partner which is not apparently for carrying on in the ordinary course the limited partnership's activities or activities of the kind carried on by the limited partnership binds the limited partnership only if the act was actually authorized by all the other partners."

Business Structures

LLPs/Professional Corps.A limited liability partnership (LLP) is a partnership in which some or all partners have limited liability. It can look like and have elements of partnerships and corporations, important difference from that of an unlimited partnership:

- An LLP requires that one partner is not responsible or liable for another partner's misconduct or negligence.- An LLP requires some partners have a form of limited liability similar to that of the shareholders of a corporation.- An LLP must also have at least one "general partner" with unlimited liability. - An LLP also contains a different level of tax liability from that of a corporation.- Limited liability partnerships are distinct from limited partnerships , allow all LLP partners to have limited liability.

Business Structures

Discussion and Questions

Business Structures

Application Page 13

Affidavit of Certification:

- Certification of Socially and Economically Disadvantaged

- Must be Notarized

Signed, notarized statement of membership in a presumptively disadvantaged group

If in question, certifying entity has burden of proof Additional information may be required beyond notarized

statement if well-founded reason-49 CFR 26.63- Written explanation of reasons for questioning group membership- Length of time individual held to be member of group- Whether person is regarded as a member by relevant community- Appropriate documentation of group membership

Not in presumptively disadvantaged class, or group membership not proven, applicant required to prove individual social disadvantaged status

Appendix E— Must include the following:One distinguishing featurePersonal experiencesBarriers to entry in business worldEducation - Employment - Business History

Affidavit of Certification

Application Page 14

Supporting Documentation Checklist:

- Useful Tool to Provide Required Documentation

Application Page 15

Location to Provide Services:

- Selection of the Districts to Preform Work

Application Page 16

Areas of Work:

- Work Types that Firm requests Certification

Discussion and Questions

Other Pages