8(a) Certification Basics: Ten Essential Steps to Help You Prepare an Effective 8(a) Application
If your company is interested in applying for Small Business Administration 8(a) certification, there are a number of prerequisites you should fulfill in preparation for submitting your 8(a) application to the Small Business Administration for review.
The following list is a quick summary of ten simple yet essential steps to take before applying for 8(a) certification:
1. Register your company. Make sure your company already possesses a federal employer identification number (sometimes called a “FEIN” or an “EIN”), a Data Universal Numbering System (“DUNS”) number from Dun and Bradstreet (a credit reporting agency for businesses), and a complete profile in the federal Central Contractor Registration database, or CCR (which should be updated at least once per year). Here is where to go if you are missing one of these key items:
- Federal Employer Identification Number: http://www.irs.gov/businesses/small/article/0,,id=102767,00.html
- Data Universal Numbering System (DUNS): http://www.dnb.com
- Central Contractor Registration: http://www.ccr.gov
2. Pay your taxes. Pay all of your federal, state, and local taxes in full or else obtain payment plans and make your first scheduled payment under each payment plan before applying to the 8(a) program. Make sure all company owners, officers, directors, and key staff members are also up-to-date on their tax obligations.
3. Check your standing with the state. Check with your Secretary of State’s office to ensure that your company is in good standing so you can get a “certificate of good standing” or “certificate of status” marked with the current year to include inside your 8(a) application. Pay any annual fees and property taxes due to the state and file your annual report, if required, to maintain your company’s good standing.
4. Organize your company formation documents. Make sure you have all of the required company formation documents for your particular state and your particular company structure. For example, if you are a Limited Liability Company (LLC) owner, you will need an Operating Agreement and Articles of Organization to operate legally in most states. If anything is missing, either create the required document using a reputable legal site like http://www.nolo.com or order a complete copy from the state; there is usually a nominal fee for copying expenses.
5. Find your tax records and don’t forget the W-2 forms. You will need to provide the SBA with three consecutive years’ worth of company taxes and two consecutive years’ worth of personal taxes. The SBA wants all schedules, attachments, and W-2 forms. You don’t need to submit state taxes to the SBA unless the SBA specifically asks you for them. If you have lost your taxes, order full copies from the IRS but expect this process to take several weeks.
6. Inform all company owners, officers, and key employees about the requirement to provide personal information to the government. For your 8(a) application to be successful, all owners, officers, directors, and key employees must submit personal and financial data to the SBA for review, so you will need their consent. Because of a recent, scathing Government Accountability Office (GAO) report about problems within the 8(a) program, all company officers, owners, and key representatives should expect increased scrutiny from the SBA during the 8(a) application process. Honesty and full disclosure are imperative.
7. Assemble your licenses and permits. Obtain current, valid copies of all occupational, tax, state, county, and local licenses and permits your business needs to operate legally in its state for inclusion in the 8(a) application. If you are uncertain which licenses and permits you need for your jurisdiction, contact your Secretary of State’s office for help.
8. Ensure your company is actually small. This tip might sound ridiculous, but some companies fail to determine that they meet the Small Business Administration size standard for their primary industry before filing for 8(a) status. If you are uncertain what constitutes a “small business” for your industry, consult the current SBA size standards to make sure your company truly is considered small (and don’t forget to add in any affiliates or subsidiaries when calculating your size): http://www.sba.gov/contractingopportunities/officials/size/index.html
9. Ensure your primary North American Industrial Classification System (NAICS) code has not changed since last year. Gather your contracts from the most recent calendar year, determine which NAICS code they fall under, and assess whether or not your primary NAICS has shifted into another category since the previous year in operation. Your primary NAICS code affects your size standard (see #8 above.) If you don’t know what your NAICS code, is the Census Bureau can help you with that: http://www.census.gov/eos/www/naics/
10. Check your personal credit report for errors and fix any mistakes you find. These days the SBA runs credit checks on most 8(a) applicants, so obtain a free copy of your personal credit report at http://www.annualcreditreport.com and check it rigorously to make sure there are no critical errors. This is especially important if you think you might be hovering near the 8(a) program personal net worth cap of $250,000—you don’t want old investments that you sold years ago to remain on your credit report, for example.
If you follow these ten simple preparatory steps, meet the baseline 8(a) eligibility requirements, locate and compile all of the required materials listed on your SBA 8(a) checklist (check your SBA Form 1010 for the checklist), and approach your 8(a) application with patience, honesty, and diligence, you should be pleasantly rewarded with 8(a) certification within a few months.