A beneficial owner is defined as any individual who owns, directly or indirectly, 25% or more shares of the business.
Step 1: Identify Direct Ownership
Start by finding individuals who directly own 25% or more of the company.
Direct ownership means the person holds shares in the company under their own name, not through another entity.
If an individual owns 25% or more of the shares directly, they should be designated as a beneficial owner.
Step 2: Assess Indirect Ownership through Other Entities
If your business has a complex ownership structure, with intermediate companies or entities, you will need to calculate indirect ownership.
- Begin at the lowest level in the ownership chain and work your way up.
- Multiply the ownership percentages at each layer as you go through the chain.
- If, after this calculation, an individual owns 25% or more of your company, they should also be designated as a beneficial owner.
Example of Indirect Ownership Calculation
Company A is owned by:
Individual X, who owns 25% directly
Company B, which owns 25% (and is 100% owned by Individual W)
Company C, which owns 50% (with two shareholders: Individual Y owns 90% and Individual Z owns 10%)
| Person | How they own shares | Ownership % in Company A | Beneficial Owner? |
| Individual X | Direct | 25% | Yes |
| Individual W | 100% of Co. B (owns 25%) | 100% × 25% = 25% | Yes |
| Individual Y | 90% of Co. C (owns 50%) | 90% × 50% = 45% | Yes |
| Individual Z | 10% of Co. C (owns 50%) | 10% × 50% = 5% | No |
Example of ownership through multiple entities
Additionally, an individual’s ownership in a company can be spread across multiple entities, so it’s important to add up all indirect ownership paths when making your calculation.
Company D owns 30% of Company X. Individual Q owns 50% of Company D.
Company E owns 25% of Company X. Individual Q owns 80% of Company E.
| Person | How they own shares | Ownership % in Company A | Beneficial Owner? |
| Individual Q | 50% of Co. D (30%), 80% of Co. E (25%) | (50% × 30%) + (80% × 25%) = 35% | Yes |