Certification in Supplier Diversity Practice Exam

What defines a small disadvantaged business?

1. Owned by an individual with a net worth exceeding $1 million

2. 51% owned and controlled by a socially and economically disadvantaged individual

3. Operating for less than three years

4. Certified by private corporations only

The correct answer is: 51% owned and controlled by a socially and economically disadvantaged individual

A small disadvantaged business is specifically defined as being at least 51% owned and controlled by an individual who is both socially and economically disadvantaged. This definition is integral to various government programs and initiatives designed to promote diversity and inclusion in the marketplace. The ownership and control criteria ensure that the individual who is designated as disadvantaged has tangible authority and influence over the business operations, thereby enhancing opportunities for groups that might not traditionally have equal access to capital, markets, or resources. Socially disadvantaged individuals often belong to specific minority groups or have faced systemic barriers, while economically disadvantaged individuals typically have a net worth below a certain threshold, established to identify those who might struggle to compete on an equal footing in the business world. Other options do not accurately represent the definition of a small disadvantaged business. For instance, the threshold of net worth mentioned in the first option contradicts the criteria set for disadvantaged business status. Operating duration does not dictate a business's disadvantaged status either, as a small disadvantaged business can be new or well-established. Lastly, being certified only by private corporations limits the scope of certification and does not encompass the broader regulatory definitions often provided by governmental entities.