Key Takeaways:
- The control person is an individual who exercises substantial control over a company’s operations or decision-making.
- Every reporting company must identify at least one control person in their BOI report.
- Control persons can include senior officers, major decision-makers, and those with the power to appoint or remove key personnel.
Under the Corporate Transparency Act (CTA), businesses must report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). A crucial aspect of this reporting is identifying the control person. But who controls the beneficial ownership rule, and why is this information important?
Understanding the Control Person in Beneficial Ownership
A control person, also known as an individual with substantial control, significantly influences the company’s management, decision-making, or operations. While there is no separate designation for a control person on the Beneficial Ownership Information Report (BOIR) form, they are simply listed as a beneficial owner. This means that even if the control person does not hold any ownership stake in the company, their authority over its actions requires them to be included as a beneficial owner on the BOIR.
According to FinCEN’s guidelines, a control person can be identified through several criteria:
- Senior Officers: This includes positions such as CEO, CFO, COO, or General Counsel.
- Authority to Appoint/Remove: Individuals who can appoint or remove senior officers or a majority of the board of directors.
- Important Decision-Makers: Those who make significant decisions about the company’s business, finances, or operations.
- Other Forms of Substantial Control: This catch-all category includes any other means of exercising substantial control over the company.
Who is the Control Person in the Beneficial Ownership Rule? Key Considerations
When determining the control person for your Beneficial Ownership Information (BOI) report, it’s essential to consider all individuals who might meet the criteria. In many cases, especially for smaller businesses, the control person might be obvious—such as the CEO or majority owner. However, for larger or more complex organizations, multiple individuals may be required to be listed on the BOI report.
It’s important to note that every reporting company must identify at least one beneficial owner. If no individual owns 25% or more of the company, the company must determine who the control person is and list them as the sole beneficial owner. This ensures that there’s always a responsible party associated with the business in FinCEN’s records.
Aaliyah Igwe is the sole individual listed as a control person on the Beneficial Ownership Information Report despite being a minority shareholder. This is because:
- Igwe manages the company’s operations and is defined as a control person.
- No other owner holds 25% or more of the company’s shares, so no other individual needs to be listed.
- The 25% ownership threshold is the minimum requirement for being listed as a beneficial owner, but regardless of percentage, all control people must be listed.
The ownership structure of Apex Solutions is as follows:
- Aaliyah Igwe, CEO and 10% owner: Listed as a control person
- All other owners: Passive investors, each holding less than 25% of shares
This arrangement indicates that while Igwe may not be the largest shareholder, she has the most influence over the company’s management and decision-making processes. It is possible to be a control person without any ownership in a company.
Summary and Next Steps
Understanding who qualifies as a control person is crucial for accurate BOI reporting under the Corporate Transparency Act. By properly identifying these individuals, businesses contribute to the transparency goals of the CTA and ensure compliance with FinCEN requirements.
Are you ready to file your BOI report? Don’t let the complexities of beneficial ownership reporting overwhelm you. We’ve integrated with FinCEN’s BOI Secure Filing System and created a user-friendly platform to file your report. This streamlined process makes it easy for you to comply with the new regulations. File your BOI report with confidence today!
