defined by FAR § 121.103.
The best place to begin in determining whether another company may be an “affiliate” for SBA purposes is to look at your corporate structure and the individuals or entities that hold an ownership interest in the company. For example, if an individual or entity owns a controlling interest in your company (Company A) and also owns a controlling interest in a second company (Company B), then Company B is an affiliate of Company A, even if the companies are in completely different industries. The effect of affiliation requires Company A to include all employees or gross receipts of Company B in its size calculations. Other examples of areas that need to be examined regarding shared control that could lead to “affiliation” include stock ownership, merger agreements, stock options, common management (officers and directors), economic dependency and family members
Does your business qualify as a “small business” under the Small Business Administration guidelines?
The U.S. Small Business Administration (SBA) was created in 1953 to assist “small businesses” in obtaining financial assistance and procuring contracts to work with the federal government. Many government agencies are required to set aside a certain percentage of their contracting opportunities for “small businesses.” Contracting with the federal government could be a lucrative opportunity for your company and is often underutilized by businesses. Many times companies are intimidated by the “red tape” associated with becoming certified as a small business. While some “red tape” must be cut, your company may be eligible to “self certify” as a small business and become eligible for these contracting/financial assistance opportunities with little administrative legwork.
The critical question for small business self-certification is the following: is my company a small business under SBA guidelines? The answer can be both simple and complex, depending on the nature, structure and ownership of your business.
The Federal Acquisition Regulations (FAR) set forth the guidelines for determining whether your company qualifies as a “small business.” The size determinations are industry specific. Industries are divided into specific groups under the North American Industry Classification System (NAICS) code. Each industry is given an NAICS code. The SBA established specific size benchmarks for each NAICS code. These size benchmarks include parameters such as the number of employees and the average aggregate amount of gross receipts for the past three years.
While the foregoing calculation seems simple, it is unfortunately complicated by several other factors. One of which is the requirement that each business must include its “affiliates” – as that term is defined by FAR § 121.103 – within the size calculations for its NAICS code. The term “affiliate” is both broadly and specifically hip issues.
If you would like assistance in determining whether your company may be eligible for SBA small business certification, please contact us.