A beneficial owner means, with respect to an entity, an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise exercises substantial control over the entity or owns or controls not less than 25 percent of the ownership interests of the entity. The following are not beneficial owners:
(i) a minor child, as defined in the State in which the entity is formed, if the information of the parent or guardian of the minor child is reported in the FinCEN report;
(ii) an individual acting as a nominee, intermediary, custodian, or agent on behalf of another individual;
(iii) an individual acting solely as an employee of a corporation, limited liability company, or other similar entity and whose control over or economic benefits from such entity is derived solely from the employment status of the person;
(iv) an individual whose only interest in a corporation, limited liability company, or other similar entity is through a right of inheritance; or
(v) a creditor of a corporation, limited liability company, or other similar entity, unless the creditor meets the requirements of the first sentence above.
An individual may reach the 25 percent threshold by jointly owning or controlling with one or more other persons an undivided ownership interest in a reporting company. This means that if a married couple owns 25% or more of an entity as community property or joint tenants they are both considered to be beneficial owners.
An individual may directly or indirectly own or control an ownership interest in a reporting company through a trust or similar arrangement. An individual may own or control ownership interests by way of the individual’s position as a grantor or settlor, a beneficiary, a trustee, or another individual with authority to dispose of trust assets. In relation to trust beneficiaries in particular, FinCEN believes that it is appropriate to consider an individual as owning or controlling ownership interests held in trust if the individual is the sole permissible recipient of both income and principal from the trust, or has the right to demand a distribution of, or withdraw substantially all of the assets from, the trust. Other individuals with authority to dispose of trust assets, such as trustees, will also be considered as controlling the ownership interests held in trust, as will grantors or settlors that have retained the right to revoke the trust, or to otherwise withdraw the assets of the trust.