What is an '8(a) Firm'

An 8(a) firm is a small business that is owned and operated by socially or economically disadvantaged individuals. The status is designated by the Small Business Administration (SBA), the United States agency charged with supporting the growth and development of small businesses.

BREAKING DOWN '8(a) Firm'

The 8(a) status is specially granted to any small business by the SBA, making it eligible for financial assistance, training, mentoring and any other form of assistance. In order to qualify for this special status, businesses must be owned and operated by individuals who are considered socially or economically disadvantaged.

The 8(a) status is outlined specifically in Section 8(a) of the Small Business Act, and is designed to help small, disadvantaged businesses compete in the general market.

Rationale Behind 8(a) Firms

One of the main reasons behind the creation of the 8(a) status was to increase business involvement by a broader portion of society. The SBA identifies several groups that are eligible for 8(a) status including: Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, and Subcontinent Asian Americans. 

Benefits of 8(a) Status

Through the 8(a) Business Development Program, owners can compete for special contracts that help level the playing field for their small businesses. These small businesses can use the program to form joint ventures with already-established businesses to form mentor-protégé relationships, as well as for management and technical assistance. 

Criteria to Qualify for 8(a) Status

In order to qualify for 8(a) status under SBA guidelines, a business must meet the following criteria:

  • It must be a small business.
  • It must not have participated in the program before.
  • At least 51 percent of the business must be owned and operated by U.S. citizens who are considered economically and socially disadvantaged.
  • It must be owned by someone with $4 million or less in assets.
  • The owner must manage day-to-day operations and must make long-term decisions.
  • The owner must be of good character.

Owners interested in taking part in the program must first register their businesses on the SBA's website. The administration will then send a letter to the owner explaining whether the business was accepted into the program. The certification lasts for nine years — the first four years are considered to be developmental, while the remaining five are deemed to be a transition phase. 

In order to keep its status and good standing in the program, the business is subject to annual reviews. During these, the owner will have to draw up business plans and will have to undergo systematic evaluations. 

RELATED TERMS
  1. Small Business Administration - ...

    The Small Business Administration is a U.S. government agency ...
  2. Small Business Development Center ...

    The Small Business Development Centers (SBDC) provide free marketing, ...
  3. Status Symbol

    A status symbol is an object which is meant to signify its owners' ...
  4. SEC Form N-6F

    A filing with the Securities and Exchange Commission (SEC) that ...
  5. Single Filer

    Single filers are taxpayers who are unmarried and do not qualify ...
  6. Close Corporation Plan

    A close corporation plan is a form of business buy-sell agreement. ...
Related Articles
  1. Managing Wealth

    How ‘Small’ Is a Small Business: The Statistics

    Doing the math will help you determine if you qualify as a small business and when your business gets too big to be small. Turn to the SBA for help.
  2. Small Business

    The 4 Most Common Reasons a Small Business Fails

    Discover the most common reasons small businesses fail, including capital formation, management concerns, planning issues and marketing missteps.
  3. Managing Wealth

    Financial Literacy Tools for Small Business Owners

    Learn more about where you can access some of the best free financial literacy resources and tools available for small business owners.
  4. Managing Wealth

    5 Reasons Small Business Owners Sell Their Companies

    Selling a business you've built from scratch isn't done lightly. Consider these moments when the opportunity might be right for you.
  5. Small Business

    5 Obstacles Small Businesses Must Overcome

    Small businesses can be nimble and innovative. But larger companies have name recognition, can raise capital and have other advantages that are hard to beat.
  6. Investing

    The 4 Best Websites For Small Business Loans (EBAY, PYPL)

    Discover some of the best websites that small business owners utilize to obtain necessary financing at competitive interest rates.
  7. Insights

    5 Ways Your Small Business Is at Risk for a Cyber Attack

    Small business owners think they are immune to hacks because of their size, but they are not. When they find the guard is down, hackers are exploiting common weakness.
  8. Small Business

    Business Startup Costs: It's in the Details

    Don't overlook the details when starting up a business; it's the small expenses that have the potential to make or break a great idea.
  9. Small Business

    5 Traits Of A Successful Small Business

    If you own your own company, these characteristics will be ones you want to emulate.
  10. Small Business

    How Trump's Tax Breaks Could Affect Small Business

    Small businesses are in a position to be affected by Trump's proposed tax plan.
RELATED FAQS
  1. What are the major types of business in the private-sector and how do they differ ...

    Learn more about how private companies are organized and how large and small companies differ from one another in organization ... Read Answer >>
  2. What is the Education Savings Bond Program?

    Learn about the education savings bond program and find out if you are eligible to use your savings bonds for payments toward ... Read Answer >>
Trading Center