What is a Beneficial Owner of a Company?
What California’s New Beneficial Ownership Law Means for Businesses
Two generations ago, being an astronaut was every kid’s dream job. Today, the world’s coolest job is to be an entrepreneur, and with the rise of influencer content, smartphone app-based businesses, and so many other landmarks of the digital landscape, this career goal is within reach of more people than ever before. Everyone brags on the Internet, whether they have a reason to brag or not. Given that most businesses close within five years of opening, if your company is still operating in its sixth year, you have as much reason to brag as anyone has. Well, let’s hear it! Why aren’t you bragging?
Some successful business owners in California are less than eager to tell the world about their success. In fact, you might even think that they do not want to be seen in public with their successful business ventures at all. A new California law requires increased transparency about the identities of parties that have substantial ownership interests in companies. To find out more about complying with the new business ownership disclosure requirements, contact a California business law attorney.
What is a Beneficial Owner of a Company?
The Corporate Transparency Act is a federal law passed in 2021. Since then, several states have proposed similar laws at the state level that echo, or even expand upon, the provisions of the federal law. New York already has such a law on the books, and the legislatures of Maine and Maryland are considering their own bills. In June 2024, California passed Senate Bill 1201, the Beneficial Owners Act. It requires all beneficial owners of corporate entities, regardless of size and business structure, to disclose the names and residential or business addresses of all individuals who are beneficial owners of the entity. The names of the individuals will be publicly available information.
California already had stricter requirements than federal law in this regard, even before SB 1201 passed. The difference is that the identities of beneficial owners of businesses will be searchable by the public instead of only by government and law enforcement. A beneficial owner is someone who owns at least 25% of ownership interest in the company or who plays a major decision-making role in its operations.
The purpose of the law is to prevent businesses from operating as shell corporations and to prevent individuals from concealing their ownership of LLCs used for business or real estate ownership. A substantial number of the California entities that will need to disclose the identity of their beneficial owners are commercial landlords. The law is part of a larger endeavor to prevent money laundering and financial crime in the form of real estate ownership.
Contact SNR Law Group About Compliance With Business Ownership Laws
A business law attorney can help you comply with all the laws regarding business ownership disclosure if you are establishing an LLC or another type of corporate entity. Contact SNR Law Group in Tustin, California, to discuss your case.
Sources
https://www.jdsupra.com/legalnews/corporate-transparency-wave-new-york-9627548