Beneficial Ownership: What You Actually Need to Collect and Why

When an LLC buys a property, the LLC is just a legal wrapper. The question the government wants answered is: which real human beings actually own or control this entity? Those humans are the beneficial owners, and they are the entire point of the reporting requirement. Shell companies are useful for money laundering precisely because they hide the people behind them. This rule forces disclosure.

There are two ways a person qualifies as a beneficial owner. First, anyone who directly or indirectly owns 25% or more of the entity. If three people each own a third of an LLC, all three are beneficial owners. Second, anyone who exercises substantial control over the entity, regardless of their ownership percentage. A CEO who owns 1% of the company is still a beneficial owner because of their control.

Substantial control is broader than most people expect. It includes any senior officer: CEO, COO, CFO, General Counsel, or equivalent. It includes anyone who can appoint or remove officers or a majority of directors. It includes anyone who makes important decisions for the entity, and FinCEN defines "important decisions" broadly: selling major assets, mergers, major expenditures, compensation of senior officers, choosing business lines, or approving operating budgets.

There is also a catch-all: "any other form of substantial control." This exists to prevent creative structuring designed to avoid disclosure. If someone effectively controls the entity through unconventional arrangements, they are still a beneficial owner even if they do not fit neatly into the categories above.

Trusts have their own set of rules for identifying beneficial owners. The following people qualify: trustees, any individual with authority to dispose of trust assets, a sole beneficiary who can demand a distribution or withdraw substantially all assets, the grantor or settlor if they have the right to revoke the trust, and the beneficial owners of any entity or trust that holds one of these positions.

In practice, revocable living trusts typically have straightforward beneficial ownership: the grantor who created the trust and can revoke it. Irrevocable trusts with multiple beneficiaries and independent trustees get more complex. When the trust structure is not immediately clear from the documents you have, escalate and get the trust instrument reviewed before making assumptions.

For every beneficial owner identified, you need to collect: full legal name, date of birth, current residential address (not a business address or P.O. box), citizenship, and a taxpayer identification number (Social Security Number for U.S. persons, or ITIN for non-citizens).

You also need to document the basis for their beneficial ownership: do they qualify because they own 25% or more, because they exercise substantial control, or both? For trusts, which role do they hold: trustee, grantor, beneficiary, or person with disposal authority? This is not just a data collection exercise. It is the substance of what FinCEN wants to know.

The 111-field count sounds intimidating, but it is less scary once you see how it breaks down. The Real Estate Report has six sections: reporting person information (your firm's details), property information (address, legal description, purchase price, payment details), transferor information (the seller), transferee entity or trust information (the buyer's entity name, address, TIN, formation jurisdiction, entity type), information about individuals representing the transferee, and beneficial owner information.

FinCEN estimates that roughly 60% of the fields need to be completed for a typical transaction. Not every field applies to every deal. The beneficial ownership section is the most labor-intensive because you need the data listed above for every qualifying individual. A single-member LLC is simple. A multi-layered entity structure with several owners and officers requires more work.

They will. Asking for Social Security numbers, dates of birth, and residential addresses feels invasive to many buyers, especially those who formed an LLC specifically for privacy. You need to be prepared for resistance.

The response is straightforward: this is a federal reporting requirement under the Bank Secrecy Act, not a request from your firm. The reporting person is legally obligated to file this information with FinCEN. You are not asking as a favor. If you handle the conversation early in the transaction rather than springing it at the closing table, you get much better cooperation.

If a buyer refuses to provide beneficial ownership information, document the refusal in writing, note what information was requested and when, and escalate according to your firm's policy. Do not just skip the fields and file an incomplete report. And do not skip the filing entirely. Both of those create worse problems than the awkward conversation.