Effective January 1, 2024, beneficial ownership information (BOI) for corporations, LLCs, and many other business entities must be disclosed and reported to the Financial Crimes Enforcement Network (FinCEN). The aim is to combat money laundering, terrorism financing, organized crime, and related financial offenses.

As part of the disclosures, organizations must detail all “beneficial owners” of an organization, but who exactly is a beneficial owner? Thankfully, the Corporate Transparency Act outlines the relevant criteria.

Defining a “beneficial owner” for BOI reporting

A “beneficial owner” includes any individual who, directly or indirectly, exercises substantial control over a company. The threshold for substantial control is defined by whether an individual meets any of these four general criteria:

• Is a senior officer;
• Is an important decision-maker;
• Has authority to appoint or remove officers or a majority of directors; or
• Has any other form of substantial control over the reporting company.

It’s important to note: No ownership interest in the company is required. You might not think you “own” the company and therefore can’t be classified as a beneficial owner, but if you satisfy one or more of the above criteria, you must disclose your relationship.

Individuals who, directly or indirectly, own or control at least 25% of ownership interest in a reporting company are also categorized as beneficial owners. This can take many forms, as well. Controlling large portions of equity, stock, or voting rights are all examples of ownership interests.

There is no limit on the number of individuals (or other controlling organizations, like businesses and trusts) who may be deemed as exercising substantial control over a given company. Individuals can exert control through contracts, agreements, intermediary entities, or other relationships.

All businesses (with some exceptions) are now required to disclose these beneficial owners in their BOI reports to FinCEN. Failure to comply with the CTA or any FinCEN regulations may result in significant penalties. If you don’t feel comfortable navigating the complex BOI reporting framework, including interpretations of CTA provisions and related legal documents, Propel can help. Simply say hello and our team of experts will guide you through the process.