The 8(a) certification for Socially and Economically Disadvantaged Individuals can be a major game changer for a business. So much so that many of the calls we receive are from people whose parents or siblings have owned 8(a) firms in the past and now they would like the same opportunity to advance themselves and their businesses. The average 8(a) firm does over $5MM per year in business with the federal government
Here are the guidelines for moving forward with an 8(a) legacy application.
Before reviewing the application the SBA must first grant a waiver. This is generally based upon two key factors.
Two criteria to granting a waiver:
Industry: Is the applicant in a different industry than the graduated family owned 8(a) firm? To determine whether the firm is in a different industry the SBA will look at the first three numbers of both firms Primary NAICS Codes. If they are the same then the SBA will view both firms as being in the same industry.
Example
236115 Housing, single-family, construction general contractors
236220 Office building construction
Location: Is the applicant in a different geographic location. Generally the SBA looks first at the state in which the firm is located. If the state is different but the industry is the same they could still have issues with adjoining states such as Maryland and Virginia. Additionally, the SBA looks at the territory the firms serve. If the firms are far apart geographically but both claim to serve clients nationwide the SBA will view them to have overlapping services areas.
Legacy Waiver
1 & 2 compliance then the applicant can move forward with an application at any point with high likelihood of having a successful waiver.
1 compliance 2 non-compliance - This is generally not an issue and the firm can apply right away. Any contact between the firms should be very minor, such as a common attorney or accountant.
1 non-compliance 2 compliance - The SBA will take a closer look at geographic separation between the two firms to be confident they are not overlapping. Any contact between the firm would result in the SBA determining that there really isn't geographic separation and likely result in a denial.
1 non-compliance 2 non-compliance - In this situation the firm will need to wait about five years from the family member's 8a graduation before it applies for 8a. They can be no contact ever between the two firms.
Danger of Affiliation
If the SBA Affiliates the applicant and the close kin relative than it could take years to unwind that affiliation if the new 8(a) applicant is wanting to apply in the same industry and geographic location. If an affiliation has been established generally you are better off closing the new firm and starting over.
Non-"Approvable"
. The close kin relative owns more than 9.9% of the 8(a) applicant firm.
Potential 10 Year Delays
. The new 8(a) applicant work(ed) for the prior 8(a) firm.
. The new firm was a subcontractor to the parents firm.
. Both the prior 8(a) and new 8(a) are located in the same facility.
. The two firms share any assets or employees.
. There are or ever were loans in place between the two firms.
Understanding all of the rules with regards to the 8a process can be difficult for someone that does not compile or analyze 8a applications for a living. Give us a call if you are having issues with understanding your 8a application. 859-442-1050 or visit our website for additional information.
Here are the guidelines for moving forward with an 8(a) legacy application.
Before reviewing the application the SBA must first grant a waiver. This is generally based upon two key factors.
Two criteria to granting a waiver:
Industry: Is the applicant in a different industry than the graduated family owned 8(a) firm? To determine whether the firm is in a different industry the SBA will look at the first three numbers of both firms Primary NAICS Codes. If they are the same then the SBA will view both firms as being in the same industry.
Example
236115 Housing, single-family, construction general contractors
236220 Office building construction
Location: Is the applicant in a different geographic location. Generally the SBA looks first at the state in which the firm is located. If the state is different but the industry is the same they could still have issues with adjoining states such as Maryland and Virginia. Additionally, the SBA looks at the territory the firms serve. If the firms are far apart geographically but both claim to serve clients nationwide the SBA will view them to have overlapping services areas.
Legacy Waiver
1 & 2 compliance then the applicant can move forward with an application at any point with high likelihood of having a successful waiver.
1 compliance 2 non-compliance - This is generally not an issue and the firm can apply right away. Any contact between the firms should be very minor, such as a common attorney or accountant.
1 non-compliance 2 compliance - The SBA will take a closer look at geographic separation between the two firms to be confident they are not overlapping. Any contact between the firm would result in the SBA determining that there really isn't geographic separation and likely result in a denial.
1 non-compliance 2 non-compliance - In this situation the firm will need to wait about five years from the family member's 8a graduation before it applies for 8a. They can be no contact ever between the two firms.
Danger of Affiliation
If the SBA Affiliates the applicant and the close kin relative than it could take years to unwind that affiliation if the new 8(a) applicant is wanting to apply in the same industry and geographic location. If an affiliation has been established generally you are better off closing the new firm and starting over.
Non-"Approvable"
. The close kin relative owns more than 9.9% of the 8(a) applicant firm.
Potential 10 Year Delays
. The new 8(a) applicant work(ed) for the prior 8(a) firm.
. The new firm was a subcontractor to the parents firm.
. Both the prior 8(a) and new 8(a) are located in the same facility.
. The two firms share any assets or employees.
. There are or ever were loans in place between the two firms.
Understanding all of the rules with regards to the 8a process can be difficult for someone that does not compile or analyze 8a applications for a living. Give us a call if you are having issues with understanding your 8a application. 859-442-1050 or visit our website for additional information.
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