Minority business enterprise: Overview, definition, and example
What is a Minority Business Enterprise (MBE)?
A minority business enterprise (MBE) refers to a business that is at least 51% owned, operated, and controlled by one or more individuals who are from a minority group. In the context of the United States, this typically includes individuals who are African American, Hispanic, Native American, Asian American, or Pacific Islander. MBEs may also extend to women-owned businesses or other historically disadvantaged groups, depending on the specific regulations and definitions in place.
The goal of recognizing and supporting MBEs is to promote diversity, equal opportunity, and inclusion in the business world, ensuring that minority groups have access to the same opportunities and resources as other business owners.
Why are Minority Business Enterprises important?
Minority business enterprises are important because they help promote economic inclusion and ensure that businesses from diverse backgrounds have access to opportunities in various industries. Supporting MBEs can reduce disparities in wealth and business ownership, fostering economic growth and innovation within communities that have historically been underserved or excluded from mainstream economic activities.
For businesses, engaging with MBEs can be a way to fulfill diversity and inclusion goals, often required in supplier diversity programs. It can also create new business opportunities and partnerships, benefiting both the MBE and the companies they collaborate with.
Understanding Minority Business Enterprises through an example
Imagine a woman-owned construction company that is 60% owned by a woman of Hispanic descent. The company qualifies as a Minority Business Enterprise because it meets the requirement of being at least 51% minority-owned. The company participates in a government contract that encourages businesses to source from MBEs to promote diversity. As a result, the construction company has access to contracts and resources that it may not have had without the MBE designation.
In another example, a small technology startup founded by an African American entrepreneur applies for a certification as an MBE. After obtaining the certification, the startup is able to access a broader range of business opportunities, including partnerships with larger corporations and government contracts, that prioritize working with MBEs.
An example of a Minority Business Enterprise clause
Here’s how an MBE clause might appear in a contract or supplier agreement:
“The Supplier certifies that it is a Minority Business Enterprise (MBE), as defined by the U.S. Small Business Administration, and agrees to provide documentation of its MBE status upon request. The Buyer agrees to make efforts to prioritize working with MBE suppliers in accordance with its diversity and inclusion policy.”
Conclusion
A minority business enterprise (MBE) is a business that is at least 51% minority-owned, helping promote diversity and inclusion in the business landscape. Supporting MBEs provides opportunities for economic growth and empowerment for minority groups, ensuring a more equitable distribution of business opportunities.
For SMB owner-managers, being aware of the benefits and opportunities available through MBE certification can help access new markets, foster business growth, and contribute to greater economic inclusivity. Additionally, collaborating with or sourcing from MBEs can be beneficial for meeting diversity goals and improving the overall business ecosystem.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.