123:2-16-02 Certification criteria.

(A) Unless certified pursuant to rule 123:2-16-04 of the Administrative Code, any business seeking certification in the EDGE business development program, established under section 123.152 of the Revised Code, shall first apply to EOD for certification as an EDGE business enterprise. The application shall be made on forms provided by EOD and made in a manner prescribed by EOD.

(B) The state equal employment opportunity coordinator of the department of administrative services may certify a business as an EDGE business enterprise, provided that at least fifty-one per cent of the owner or owners of the business demonstrate (but not limited to) the following:

(1) The business is a for-profit business entity and in business for at least one year immediately preceding the date of the business's application for certification.

(2) The business is at least fifty-one per cent owned and controlled by a citizen or citizens of the United States;

(3) The business is at least fifty-one per cent owned and controlled by a resident or residents of the state;

(4) The contributions of capital or expertise used to acquire ownership must be real and substantial, going beyond pro forma ownership, and derived from individually and independently owned resources. Owners must demonstrate that they possess the experience, expertise, and knowledge to operate their particular types of business.

(a) Ownership interest obtained through a transfer or gift will be scrutinized to ensure ownership is irrevocable, was obtained for reasons other than obtaining certification into the EDGE program. De facto (on paper) ownership is not sufficient to qualify for the EDGE program. Even when company documents support the basic criteria, certification can be denied if the business operations do not reflect the ownership shown on submitted documents;

(b) Control is comprised of (but not limited to) three parts: operational control, managerial control, and independence. The socially and economically disadvantaged owner or owners must have managerial and technical competence and experience directly related to the type of business in which the business is engaged and the business's overall operations. The fifty-one per cent owner or owners must demonstrate that they actually control (but not limited to) the management and policy decisions, day-to-day operations, and direction of the business. Expertise limited to office management, administration, sales, or bookkeeping functions unrelated to the principal business activities of the business is insufficient to demonstrate control;

(c) To be viewed as controlling a business, the fifty-one per cent owner or owners cannot engage in other business interests that conflict with the management of the certified business day-to-day operations, and prevent the owner or owners from devoting sufficient time and attention to the affairs of the business;

(d) The business must be independent; its viability cannot solely depend on its relationship with another business or businesses;

(5) The business's fifty-one per cent owner or owners are both economically and socially disadvantaged.

(C) To demonstrate that a business applying for EDGE certification meets the criteria set forth in paragraphs (B)(5) of this rule, the fifty-one per cent owner or owners of the business upon request shall provide EOD the following information, in the detail and manner prescribed by EOD:

(1) Business structure information;

(2) Previous two years of personal federal and state tax returns including all schedules, W-2s, and/or 1099s;

(3) When applicable, previous two years of business federal tax returns to include all schedules;

(4) Corporate and personnel organizational information;

(5) Business sales and tax information;

(6) Personal information indicating citizenship and residence.

(7) Documentation providing proof that the owner meets the program's social and economic disadvantage criteria , and

(8) Any other relevant information EOD deems necessary.

(D) To demonstrate that a business applying for EDGE certification meets the criteria set forth in paragraph (B)(5) of this rule, the fifty-one per cent owner or owners of the business upon request shall provide EOD the following information, in the detail and manner prescribed by EOD;

(1) Financial records representing prior three years of gross receipts of the business and personal net worth of the fifty-one per cent owner or owners. If business is in operation for less than three years; submission of financial records for the period in business;

(2) If applying for a social disadvantage classification based on race, color, ethnic origin, gender, physical disability, long-term residence in an environment isolated from the mainstream of American society, business location in an area of high unemployment, or business location in a qualified census tract , documentation demonstrating membership in the claimed category.

(3) If applying for a social disadvantage classification based on personal disadvantage not common to same or similar small businesses, statement and supporting evidentiary documentation proving social disadvantaged as defined in rule 123:2-16-01 of the Administrative Code; and

(4) Any other relevant information EOD deems necessary.

(E) The coordinator will consider all of the following (but not limited to) to determine whether a business owner applying for EDGE certification meets the personal net worth threshold of paragraph (E)(1) of rule 123:2-16-01 of the Administrative Code:

(1) The fifty-one per cent owner or owners personal income for the two years prior to application;.

(2) The fair market value of all the fifty-one per cent owner or owners assets, whether encumbered or not;

(3) Asset transfers within the two years prior to application including (but not limited to) transfers to members of the owner or owners immediate family, the economically disadvantaged business, trust accounts, and others as determine by the coordinator;

(4) Assets of the owner or owner's spouse;

(5) Similar factors considered by the United States small business administration when making individual determinations of economic and social disadvantage pursuant to federal disadvantage business enterprise programs.

(6) Any other relevant information EOD deems necessary.

(F) The coordinator may compare and consider the following factors to determine whether the business of the owner or owners applying for EDGE certification is economically disadvantaged compared to similar business enterprises, as described in paragraph (D) of rule 123:2-16-01 of the Administrative Code:

(1) Annual accounts receivable;

(2) Total assets;

(3) Gross receipts for three years immediately prior to the date of the application for certification;

(4) Net sales for three years immediately prior to the date of the application for certification;

(5) Pre-tax profit;

(6) Sales versus working capital ratio;

(7) Any other relevant information EOD deems necessary.

(G) If upon consideration of this rule and other factors as determined by the coordinator, the coordinator finds that the business meets the criteria set forth in this chapter, the coordinator may determine that the business is economically disadvantaged.

(H) The coordinator shall determine that the fifty-one per cent owner or owners applying for EDGE certification is socially disadvantaged, if the business owner demonstrates personal disadvantage, as described in paragraph (P) of rule 123:2-16-01 of the Administrative Code, and the coordinator determines that the distinguishing feature or demonstrated disadvantage significantly inhibited the fifty-one per cent owner or owners business success, the coordinator may determine that the fifty-one per cent owner or owners is a socially disadvantaged person.

(I) The coordinator may administer the certification of the EDGE program in accordance to the general "disadvantaged business enterprise" certification guidelines issued by the United States small business administration in Title 13 of the Code of Federal Regulations, unless expressly stated otherwise.

(J) The coordinator may determine the length of the EDGE certification issued pursuant to this chapter, however, no certification shall exceed two-years from the date of certification, provided that the EDGE business enterprise remains in compliance and is not decertified pursuant to rule 123:2-16-06 of the Administrative Code.

Effective: 2/1/2016
Five Year Review (FYR) Dates: 11/05/2015 and 11/20/2020
Promulgated Under: 119.03
Statutory Authority: R.C. 123.152
Rule Amplifies: R.C. 123.152
Prior Effective Dates: 11/26/2004