Beneficial owner is a natural person who ultimately owns or controls 25% or more of a legal entity (or who exercises significant control over the entity). Under the USA PATRIOT Act and the Corporate Transparency Act, financial institutions must identify beneficial owners of business customers as part of KYC.
Why beneficial-ownership disclosure matters
The rule exists to prevent anonymous business ownership structures from being used for money laundering, sanctions evasion, or tax evasion. By requiring identification of natural-person owners, regulators ensure accountability.
Who counts as a beneficial owner
- Any individual owning 25% or more of the legal entity (directly or indirectly)
- A “control person” who exercises significant managerial control (CEO, CFO, managing member)
- If no individual owns 25%, the highest-percentage owner
Beneficial ownership in equipment finance
At loan origination, the lender requires:
- A beneficial ownership certification form
- Name, address, date of birth, and SSN or other ID number for each beneficial owner
- Sometimes a copy of the beneficial owner’s driver’s license
For sole proprietorships, the sole proprietor is the beneficial owner. For LLCs and corporations, owners with 25%+ interest plus a control person must be identified.
Corporate Transparency Act (2024)
Effective January 2024, the Corporate Transparency Act requires certain US business entities to file beneficial-ownership information with FinCEN directly (not just at the bank level). Most LLCs and corporations must file unless exempt. Failure to file can result in penalties of $500/day and criminal liability.
For equipment finance applicants: the BOI filing is separate from your loan application but is now an ongoing compliance requirement.