What is the Ownership Threshold?
The Ownership Threshold is a specific percentage of ownership in an entity that necessitates the disclosure of beneficial ownership information under legal requirements. In the context of the Financial Crimes Enforcement Network (FinCEN) and the Corporate Transparency Act (CTA), this threshold helps identify individuals who exercise significant control over a company.
According to the Corporate Transparency Act, the threshold for reporting beneficial ownership is generally set at 25%. This means that any individual who owns or controls 25% or more of a company’s equity, voting rights, or exercises significant influence over its operations must be reported to FinCEN. However, certain situations might require reporting even if the ownership is below this percentage, particularly if an individual has significant influence or control through other means.
The purpose of setting an ownership threshold is to ensure that companies provide transparency regarding their ownership structure. This assists in combating money laundering, terrorist financing, and other illicit financial activities. By mandating companies to disclose information about individuals with substantial control, FinCEN aims to prevent the misuse of corporate entities for unlawful purposes.
