Indirect Beneficial Ownership [Simple example]

Great NewCo LLC is a reporting company under the Corporate Transparency Act. And as such, it needs to disclose its beneficial owners, both direct and indirect.

Beneficial Owner Defined

A beneficial owner is basically an individual that owns or controls more than 25% of the ownership interest in Great NewCo.

So let's start with the first layer.

And we see that Fannie Founder is an individual that owns 60% of Great NewCo LLC.

Fannie is clearly a beneficial owner and needs to be listed as such when Great NewCo files its BOI report.

InvestCo has a direct interest of 40%.

You can access a free, interactive version of the chart with panning and zooming to export the details.

Indirect Ownership Calculation

It is also a reporting company, so we need to ask who owns InvestCo and whether they have a sufficient ownership interest indirectly in Great NewCo.

We see that InvestCo has two owners, Ivan Investor and Mei Wang.

Mei owns 30% of InvestCo.

And so her indirect interest in Great NewCo is only 12%.

That doesn't rise to the 25% threshold that the Corporate Transparency Act requires for beneficial ownership.

So while she has indirect interest, it's not enough.

She is not a beneficial owner indirectly, in this case, in Great NewCo.

Ivan, however, owns 70% of InvestCo, which means his indirect interest is 28% of Great NewCo.

So even though he doesn't have any direct interest in Great NewCo, through the InvestCo ownership vehicle, Ivan is a beneficial owner of Great NewCo and needs to be listed alongside Fannie Founder as one of the beneficial owners of Great NewCo when it files its beneficial ownership information report with the Financial Crimes Enforcement Network, or FinCEN.

Welcome to the Corporate Transparency Act.