Today’s Legal Minute for Small Businesses: Many businesses wish to get qualified as a minority owned or woman owned business (M/WOB) to secure government financing, government contracts, or in some cases even private contracts. However, a question that is asked a lot is whether or not one can give the majority of ownership to someone (in most instances a spouse) to get M/WOB status. Unfortunately, like most areas of the law, is “It Depends”. Factors that may come into play are how much the person is actually going to do with the business, whether the person is going to have any control over the direction of the business, and whether the person will have any financial stake in the business among many other things. In addition to possibly being illegal, making someone an owner of the business just to secure M/WOB status may have unintended consequences that the non M/W owner didn’t even consider such as what happens when the person goes bankrupt, gets divorced, or decides that he or she wants to play a greater role in the company than the person originally imagined. To find out whether giving ownership to someone to qualify as a M/WOB is right, and legal, in your situation, talk to a business lawyer prior to doing so!
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