The individual who ultimately owns or controls a business, even if the business is held through other companies, nominees, or intermediaries.
What is an Ultimate Beneficial Owner (UBO)?
An Ultimate Beneficial Owner (UBO) is the real person who ultimately owns or controls a legal entity, such as a company or trust. Even if a company is registered under another business or has multiple shareholders, the UBO is the natural person (or persons) who enjoys the benefits of ownership and has the authority to make decisions or derive profit from the entity.
UBO rules are essential in both anti-money laundering (AML) and corporate transparency efforts worldwide, and the U.S. has increasingly adopted global standards around UBO disclosures—particularly through the Corporate Transparency Act (CTA), which came into effect in 2024.
Who Qualifies as a UBO?
A person is typically considered a UBO if they:
- Own 25% or more of the company (directly or indirectly), or
- Exercise significant control over the company’s management or operations—even without holding a large ownership share
More than one person can be considered a UBO if control or ownership is shared.
When a foreign company owns a U.S. LLC or Corporation, FinCEN requires the U.S. entity to “look through” any parent entities and determine the individual(s) behind them who meet the 25% ownership or control threshold. This is done by tracing ownership up the chain of parent companies—domestic or foreign—until the natural person(s) are identified.
Example:
- A U.S. LLC is owned 100% by a UK company.
- The UK company is owned 50/50 by two individuals: Sarah and Ali.
- Both Sarah and Ali are UBOs of the U.S. LLC, since each indirectly owns 50%.
Even if a foreign parent company has complex layers of ownership, the U.S. entity is responsible for identifying the human owners at the top of the chain who meet the UBO criteria. FinCEN expects accurate reporting—even for foreign entities that don’t publicly disclose ownership.
UBO disclosure is now required for many U.S. companies, especially small businesses and foreign-owned entities, under the CTA. Companies must report the UBO’s full legal name, date of birth, address, and a valid identification number (like a passport or driver’s license) to FinCEN (the U.S. Treasury’s Financial Crimes Enforcement Network).
The goal is to prevent anonymous shell companies, enhance financial transparency, and combat illicit activities such as tax evasion, fraud, and terrorism financing. UBO information is not made public, but must be kept current and can be accessed by authorized U.S. agencies and financial institutions.
For non-U.S. founders, being listed as a UBO is standard if they own or control the U.S. company. This information may also be required when:
- Opening a U.S. bank account
- Applying for merchant accounts (e.g., Stripe, PayPal)
- Submitting compliance documents for tax or licensing
- Working with CPAs or legal advisors
Failure to properly disclose UBOs or submitting false information can result in civil and criminal penalties under U.S. law.
In summary, a UBO is the real person behind a company—someone who ultimately owns or controls the entity, regardless of how the ownership is structured. U.S. regulations now require most companies to disclose their UBOs to the government, including foreign-owned businesses. Understanding and complying with UBO requirements is essential for lawful business operations in the United States.
