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Zachary
Zachary, Attorney
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Experience:  Lead trial/International commercial attorney licensed 11 yrs
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RE: Women owned Business designation Hi, I co-own a consulting

Resolved Question:

RE: Women owned Business designation

Hi,

I co-own a consulting LLC business with a female business partner. We are now equal, 50/50, co-owners. Our clients have been variouse Federal Government agencies. We would like to get certified as Women Owned Business to be able to bid on more Government work. SBA stipulates that in order to get such certification, 51% of the company must be owned and operated by one or more woman.

I am looking for options to modify our ownership structure of the company to allow us to qualify for the certification, while I continue to protect my interest in the company.

Any advice would be greatly appreciated.

Thanks,
Charles
Submitted: 1 year ago.
Category: Legal
Expert:  Zachary replied 1 year ago.
Hi Charles,

Actually, the modification for this type of ownership is quite simple. The division of ownership shares in an LLC are a matter of private agreement. Thus, all that would be required to change the ownership structure would be a purchase agreement for the 1 % interest.

It is necessary under the regulations that in addition to ownership, the actual control of the business must be at 51% and the business must be primarily managed by a woman. Thus, you would giving up your right to equal say in the business and would not be able to have an equal vote with your partner if you decide to make this transfer.

As that is the case, you should consider some form of remuneration that would compensate you for this loss of control, in addition to the loss in profit share you would incur.

Please let me know if you have any further questions. Please also kindly consider rating my answer positively so that I am compensated by the website for my work on your question. Rating positively does not cause an additional charge and does not prevent us from further discussing your questions.

Best Regards,
ZDN
Customer: replied 1 year ago.

Thank you.


Is it possible to make my wife 1% owner? if so, what would she have to do for the company to qualify?


 


Or, would it be possible for me and my current partner to give up 1% each to a third party who is a female? If so, what would such third party have to do for the company to qualify?

Expert:  Zachary replied 1 year ago.
Yes.

Both of these methods would be acceptable.

However, the control of the company must actually be in the hands of a woman as well. So, this would mean that the primary management power of the company must be with a woman.

How do you and your partner currently manage the day to day operations of the company?

Also, when a big business decision comes up, how do you are your partner make that decision and what is your tie-breaker mechanism?
Customer: replied 1 year ago.

Our Operating Agreement calls for independent arbitration if we deadlock on an issue. We have not had to use this. we've been in business 2 years.


 


so the control must in the hands of one woman? or collection of women? if the latter, what would the 1% or 2% woman owner have to do to satisfy this requirement?


 

Expert:  Zachary replied 1 year ago.
Here's what I would do in your shoes, if your partner will agree to it.

If you both give up 1% to your wife, and then all decisions are made with the tie breaker going to your wife, then this will be enough to be majority controlled and managed by women. She would have to be available to make management decisions. The other way would be for you to only give up 1% to a woman, but then agree that your partner gets to decide the tie breaker in every case.

You definitely must cede control of the business in order to get the Women Owned Business certification.
Customer: replied 1 year ago.

Great idea!


One last follow up. Can we put a time limit of such change in the ownership structure? i.e. we change the ownership for 1 year, and evaluate again after one year if we want to keep the structure, and certification, or revert to the current 50/50 and lose the certification.

Expert:  Zachary replied 1 year ago.
Yes.

I would structure it as a optional buy-back at the end of one year, where you get the option to get back you full 50% ownership at the same price you were paid for giving it up.
Zachary, Attorney
Category: Legal
Satisfied Customers: 4011
Experience: Lead trial/International commercial attorney licensed 11 yrs
Zachary and 8 other Legal Specialists are ready to help you
Customer: replied 1 year ago.

Perfect! You have been a great help. Thank you so much.

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