A Minority Business Enterprise (MBE) is a business that's majority-owned by a United States citizen from a recognized minority group. According to the frameworks of U.S. business law, a minority-owned business can be owned by African Americans, Asian Americans, Hispanic Americans, and Native Americans.
In addition to new marketing and sales opportunities, becoming certified as a Minority Business Enterprise may allow your company access to grants and tax-saving opportunities that can add to your bottom line.
Keep reading to learn how MBEs work, how to get certified, and how to get the best value from MBE certification.
MBE certification is a process of gaining official government recognition that a business is majority-owned by someone from a racial minority group. The MBE program is administrated by the United States Small Business Administration. While minority businesses are not required to get certified, there are several important benefits of the certification program.
There are no specific tax breaks for minority businesses, but MBEs do have increased access to several programs that can lead to financial benefits, including an ultimate reduction in taxes. MBE businesses may also qualify for special grant programs, government contracts, and business opportunities.
As a general benefit, some large corporations may set aside a specific budget or goal for working with MBEs for tax and social justice reasons, which could bring added sales your way. You may also get access to MBE directories and local programs designed to boost minority-owned enterprises.
MBE and related programs were created to help overcome some of the systematic challenges minority-owned businesses face in the United States. Additional programs target other groups, including women-owned small businesses and service-disabled, veteran-owned small businesses. According to the National Conference of State Legislatures, at least 38 states, Washington D.C., and Puerto Rico have state-level MBE programs.
The National Minority Supplier Development Council (NMSDC) is a large nonprofit responsible for certifying new Minority Business Enterprises. If you think you qualify, you should find your local NMSDC affiliate. In Southern California, for example, you would work with the Southern California Minority Supplier Development Council (SCMSDC).
It can take up to 90 days from when you apply until you get approved, so plan ahead if you're going to apply for any loan, grant, or other programs based on MBE status. Certification is good for one year before going through an annual recertification process.
If you meet the key criteria for MBE certification (U.S. citizen with a for-profit business and qualifying minority status), you can get the ball rolling on the certification program by gathering the necessary documents and following these steps with your regional minority supplier development council.
The benefits of going through the Minority Business Enterprise certification process most directly come from networking and business growth opportunities, but that's not all.
According to the Mountain Plains Minority Supplier Business Council, you can plan on these benefits after certification:
There are no specific tax breaks for being an MBE, but there are tax benefits for other businesses to work with an MBE. That could help drive more business to your company if you're certified. This is partially thanks to the 8(a) Business Development program, which is a federal government goal to spend at least 5% of federal contracting dollars with small, disadvantaged businesses.
But while you may not get any MBE-specific tax deductions or credits, certified MBEs are in a better position than most to take advantage of tax and grant programs targeting low-income areas with diverse populations.
The New-Markets Tax Credit (NMTC) is a credit (remember, credits directly lower your tax bill, while deductions reduce your taxable income) for investing in designated community development entities (CDEs). That's a lot of acronyms! As an MBE, your business can double as a CDE. If your business is a CDE, this federal program allows you to invest in your own business to claim the tax credit.
Government programs also offer tax breaks for businesses that operate in economically distressed areas. If your for-profit business moves into such an area, you could earn additional tax savings.
There are also government and private grant programs for minority businesses. Having MBE certification may not always be a requirement, but it can't hurt when trying to prove your business qualifies for the program. Some minority businesses can also access special government-backed loans not available to others.
How Accracy can help
Getting every tax credit and deduction you qualify for isn't always straightforward. If you do your taxes yourself, you could miss out on valuable tax breaks with a huge value for your business. It would be a shame to miss out on hundreds or thousands of dollars in tax savings because you didn't know about a tax rule.
When you work With Accracy, you have access to a team of tax experts dedicated to maximizing your credits and deductions. Minority business owners can rest easy when working With Accracy"”we make sure your bookkeeping and accounting needs are met and that your taxes are prepared accurately with the best possible result. Learn more.
Minority business owners may have an uphill battle in several ways when running a company. Still, you can resist those headwinds with the support of minority business programs, including the vital Minority Business Enterprise certification.
If your business may qualify, investing in the MBE process could be a big win for your company that pays off for years to come.
We are offering free 1 Month Basic Bookkeeping to all new customers so you can experience Accracy's seemless and professional services.
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