1. Application Basics Ask? Need? Know?

2.  Group Membership  Social Disadvantage  Economic Disadvantage  Business Size  Ownership  Control Certification Standards

3. 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

4. Discussion and Questions Certification Standards

5.  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

6.  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

7. Discussion and Questions Application Standards

8. Application Page 1 Cover Page: -Formal Introduction to Firm -Date of Application - Selection of Agency Submittal

9. 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

10. 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)

11. 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)

12. 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)

13. 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)

14. 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

15. Discussion and Questions Section One Certification Information

16. 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

17. Application Page 7 Section Two: General Information  B: Business Profile (cont’d)  C: Relationships with Other Businesses  D: Immediate Family Member Businesses

18. 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)

19. Application Page 8 Section Three: Ownership  A: Background Information  B: Ownership Interest  C: Disadvantaged Status

20. Discussion and Questions Section Two General Information

21. A: Background Information  All 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 Interest  Applicant 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 Status  Applicant must complete the requested information for number 1-2  #1 Should be verified with Personal Net Worth Statement Section Three Ownership

22. Disadvantaged Owner(s) Must:  Maintain ownership of the majority shares of the firm  Provide real and substantial contributions of capital  Commensurate within the value of the firm  Indispensable to firm’s success  Have significant financial stake in firm also - Ownership on basis of expertise is not allowed  Reflect contribution & value to firm Section Three Ownership (cont’d)

23. 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 accounts  Examine loans from family or friends Section Three Ownership (cont’d)

24. 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)

25. Discussion and Questions Section Three Ownership

26. Application Page 9 Section Four: Control  A: Officers and Board of Directors

27. A: Officers and Board of Directors  Applicant 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

28. Application Page 10 Section Four: Control  B: Management Personnel  C: Inventory

29. C: Inventory  Applicant 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: Payroll  Applicant must complete the requested information for this question Section Four Control (cont’d)

30. Application Page 11 Section Four: Control  C: Inventory (cont’d)  D: Payroll  E: Financial Information  F: Loans to Firm

31. E: Financial Information  Applicant 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 Firm  Applicant must complete the requested information for number 1-3 G: Contributions or Transfers of Assets  Applicant must complete the requested information for number 1-3 Section Four Control (cont’d)

32. Application Page 12 Section Four: Control  G: Contributions and Transfers  D: Licenses and Permits  E: 3 Completed Projects  F: 3 Active Projects

33. 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 Projects  Applicant must complete the requested information for number 1-3 Section Four Control (cont’d)

34. MnUCP must only certify independent firms as DBEs – 49 CFR § 26.71(b)  Firm does not depend on another firm for sustainability  DBE owners must control the day-to-day operations of the firm  Have the power to make policy, personnel (hire/fire), decisions  Delegations permitted/must be revocable Section Four Control (cont’d)

35. Disadvantaged Owner(s) Must:  Hold highest officer positions  Control board of directors  Has expertise/ability to intelligently and critically evaluate information presented by others  Maintain 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 control  Firm controlled by family as group not eligible Section Four Control (cont’d)

36. Disadvantaged Owner(s) Must:  Remains involved in the firm  Have the burden of proof as the new owner, by clear and convincing evidence  Outside Employment  Not have full-time job elsewhere  Part time work outside of firm, cannot conflict with ability to operate the DBE firm  Not be an absentee disadvantaged ownership Section Four Control (cont’d)

37. Take into Consideration:  Co-location with other firm  Shared personnel/equipment  Salaries of owners  Non-disadvantaged owners/employees also affiliated with non- DBE firm  Owners of DBE firms with interests in other firms  Past employer/employee relationships with non-DBE firms  Pattern of working for only one prime Section Four Control (cont’d)

38. Take into Consideration:  Ownership of equipment  Disadvantaged owner Expertise  Overall understanding of type of business  Managerial and technical competence  Relevant experience and education  Ability to intelligently and critically evaluate information in firm  Administrative functions insufficient  Consider all facts in record viewed as a whole Section Four Control (cont’d)

39. Discussion and Questions Section Four Control

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

41. Sole Proprietorship  Firm and owner are one  Owner owns and operates  Don’t have to file formation documents  Report business profits as income on personal tax returns Examine  License if necessary by law  Expertise/resume/previous employment  Current outside employment  Personal tax returns for business size  Equipment—titles, leases  Loans/financing Business Structures

42. Partnerships  Owned 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 partner  Profits found on personal tax returns  Must own 51% of each class of partnership interest  Must be reflected in partnership agreement Examine:  Partnership Agreement  Can 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

43. 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

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

45. Trusts  Operate 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 Trust Can’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. Examine  The Declaration of Trust Business Structures

46. Limited Liability Corporations  A 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

47. Limited Partnerships  A 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

48. 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

49. Discussion and Questions Business Structures

50. Application Page 13 Affidavit of Certification: - Certification of Socially and Economically Disadvantaged - Must be Notarized

51.  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 feature  Personal experiences  Barriers to entry in business world  Education - Employment - Business History Affidavit of Certification

52. Application Page 14 Supporting Documentation Checklist: - Useful Tool to Provide Required Documentation

53. Application Page 15 Location to Provide Services: - Selection of the Districts to Preform Work

54. Application Page 16 Areas of Work: - Work Types that Firm requests Certification

55. Discussion and Questions Other Pages