A beneficial owner has to be an individual. In addition, “beneficial owner” does not include a minor child (although the information of their parent or guardian has to be reported); an individual acting as a nominee, intermediary, custodian, or agent of another individual; an employee acting solely as an employee; an individual whose only interest in the company is a future interest through a right of inheritance; and a creditor.
Who is considered a beneficial owner?
A beneficial owner is an individual who either directly or indirectly:
(1) exercises substantial control over the reporting company, or
(2) owns or controls at least 25% of the reporting company’s ownership interests
What is substantial control?
An individual can exercise substantial control over a reporting company in four different ways. If the individual falls into any of the categories below, the individual is exercising substantial control:
(1) The individual is a senior officer (the company’s president, chief financial officer, general counsel, chief executive office, chief operating officer, or any other officer who performs a similar function). This is regardless of whether they are list with the Secretary of State.
(2) The individual has authority to appoint or remove certain officers or a majority of directors (or similar body) of the reporting company.
(3) The individual is an important decision-maker for the reporting company.
(4) The individual has any other form of substantial control over the reporting company.
Penalties for Violation
As specified in the Corporate Transparency Act, a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. That person may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.