Who is a beneficial owner under the Corporate Transparency Act?

How is “ownership interest” defined?

The term “ownership interest” means:

(A) Any equity, stock, or similar instrument; preorganization certificate or subscription; or transferable share of, or voting trust certificate or certificate of deposit for, an equity security, interest in a joint venture, or certificate of interest in a business trust (regardless of whether the instrument is transferable, is classified as stock or anything similar, or confers voting power or voting rights);

(B) Any capital or profit interest;

(C) Any instrument convertible into any share or instrument described in (A) or (B), any future on any such instrument, or any warrant or right to purchase, sell, or subscribe to a share or interest described in (A) or (B), regardless of whether characterized as debt;

(D) Any put, call, straddle, or other option or privilege of buying or selling any of the items described in (A), (B), or (C) without being bound to do so, except to the extent that such option or privilege is created and held by a third party or third parties without the knowledge or involvement of the reporting company; or

(E) Any other instrument, contract, arrangement, understanding, relationship, or mechanism used to establish ownership.

Ownership may by direct or indirect

An individual may directly or indirectly own or control an ownership interest of a reporting company through any contract, arrangement, understanding, relationship, or otherwise, including:

(A) Joint ownership with one or more other persons of an undivided interest in such ownership interest;

(B) Through another individual acting as a nominee, intermediary, custodian, or agent on behalf of such individual;

(C) As trustee, grantor, settlor, or beneficiary of a trust or similar arrangement that holds such ownership interest;

(D) Through ownership or control of one or more intermediary entities, or ownership or control of the ownership interests of any such entities, that separately or collectively own or control ownership interests of the reporting company.

Who is not considered a “beneficial owner”?

The term “beneficial owner” does not include:

(A) A minor child, provided the reporting company reports the required information of a parent or legal guardian;

(B) An individual acting as a nominee, intermediary, custodian, or agent on behalf of another individual;

(C) An employee of a reporting company, acting solely as an employee, whose substantial control over or economic benefits from the entity are derived solely from his or her employment status, provided that the person is not a senior officer;

(D) An individual whose only interest is a future interest through a right of inheritance;

(E) A creditor of a reporting company.  

What information about beneficial owners must be reported?

A reporting company must provide the following personal, identifying information about each of its beneficial owners in its BOI report:  

• Legal name
• Date of birth
• Residence address
• Identifying number and issuing jurisdiction from a driver’s license, passport, or other authorized document
• Image of the document the number is from

When is the initial report stating beneficial owner information due?

Reporting companies created or registered before January 1, 2024 can file their report beginning on January 1, 2024.  The report must be filed by January 1, 2025. Reporting companies formed or first registered on or after January 1, 2024 and on or before January 1, 2025 must file their initial report within 90 days of receiving actual or public notice of their formation or registration. Reporting companies formed or first registered on or after January 1, 2025 must file their initial report within 30 days of receiving actual or public notice of their formation or registration. 

Summary

This article has provided a summary of how the final reporting rule implementing the Corporate Transparency Act defines “beneficial owner”. Consult the rule (31 CFR 1010.380, 87 FR 59498) for complete information. https://www.federalregister.gov/documents/2022/09/30/2022-21020/beneficial-ownership-information-reporting-requirements

For more information, contact your CT Corporation representative or call 844-878-1400. Access more resources about the Corporate Transparency Act (CTA) or sign-up for CTA updates.