All applicants for 8(a) Certification must prove, among many other factors, that they are economically disadvantaged.
First of all, there are three and not just one quantitative metric that defines an applicant’s personal economic disadvantage. These are:
- Personal “adjusted” net-worth.
- Personal assets
- Effective personal “adjusted gross income”
The personal “adjusted” net-worth metric is nothing more than your normal personal net-worth, i.e. applicant’s personal assets – applicant’s personal liabilities, excluding ENTIRELY the applicant’s ownership interest in the applicant firm and also their personal residence, whether wholly owned or owned with the applicant’s spouse or others. For the 8(a) certification, this metric must be less than $250,000 at the time of application. Are there legal and regulatory compliant methods that you can use to reduce your “adjusted net-worth” if it exceeds the $250,000 regulatory limitation? You bet there are, but the SBA won’t identify these for you. As part of our service SBC will share these with you. In determining the applicant’s adjusted net worth SBC will fully review all assets and liabilities for you and your spouse and perform a detailed analysis to determine if in fact you are below or above the regulatory limit. You will receive a detailed analysis that will fully explain and determine your adjusted net worth for 8(a) purposes.
* If you reside in a community property state, all assets and liabilities, whether jointly or separately held, are split 50/50 unless indicated within a pre or post nuptial agreement.
The personal assets metric is just that. The applicant’s personal assets, including your net-worth in the applicant firm and yes, even your retirement funds, among other assets, must be less then $4,000,000, again at the time that you apply. By the way, if you transfer some of assets, except for assets transferred to an immediate family member for normal birthdays, graduations, anniversaries and retirements (to your spouse or another person for less than their fair market value) the SBA will “look back” two years and still attribute these assets to you, despite the fact that you have not violated any Federal or state law.