Controlling Person vs. Beneficial Owner—Key Differences Explained

If your organization is a reporting company as defined by the Corporate Transparency Act (CTA), you must meet an important regulatory requirement—submitting a beneficial ownership information (BOI) report to the Financial Crimes Enforcement Network (FinCEN).

To do this, you must first identify your company’s beneficial owners, which may not be an easy feat. The term “beneficial owner” implies ownership over the company, but the qualification criteria extend beyond it to encompass persons with significant control.

This guide clarifies the controlling person vs. beneficial owner confusion to help you include all relevant individuals in your BOI report. It also explains how Harbor Compliance streamlines the reporting process to take this crucial requirement off your plate.

Controlling Party vs. Beneficial Owner

To understand the difference between a beneficial owner and a controlling person, we must look at the CTA’s definition of beneficial ownership. An individual is considered a beneficial owner if they meet either of the following two criteria:

1. Owning at least 25% of the company’s ownership interests
2. Having substantial control over a company

This definition tells us that the terms “beneficial owner” and “controlling person” aren’t mutually exclusive—a controlling person is a subcategory of a beneficial owner.

With this in mind, there’s only one notable difference here—not every beneficial owner is a controlling person, but every controlling person is a beneficial owner.

This means that anyone who exercises substantial control over your company must be added to the BOI report the same way as those who own stock, equity, or other ownership interests. The CTA requires you to submit the following identifying information on each beneficial owner:

• Full name
• Date of birth
• Current address
• An image, issuing jurisdiction, and unique number of a qualifying identification document (driver’s license, passport, etc.)

Note that you most likely won’t find the term “controlling person” in any of the official resources regarding BOI reporting (such as FinCEN’s FAQ page or the Small Entity Compliance Guide). It’s more of a colloquial expression denoting the criterion under which someone is considered a beneficial owner.

How To Identify Individuals With Substantial Control

The CTA’s substantial control criterion encompasses four categories of individuals:

1. Senior officers
2. Individuals who can appoint or remove senior officers
3. Important decision-makers
4. Anyone who exercises other forms of substantial control over the company

This criterion is defined quite broadly, which is intentional because it helps improve the overall transparency of the reporting company’s operations.

Substantial control can be exercised in two ways—directly or indirectly. The first type encompasses any control through contracts, understandings, relationships, or similar arrangements. Indirect control involves ownership or control of intermediaries that significantly influence the reporting company.

Besides the obvious forms of substantial control exercised through seniority, you need to identify other relevant types of control that could be encompassed by the catch-all criterion. Doing so is crucial for understanding who qualifies as a beneficial owner and must be included in the report.

Don’t Overlook Company Applicants

If your company was formed on or after January 1, 2024, including its beneficial owners in the BOI report isn’t enough to meet the CTA’s requirements—you must also submit the identifying information of your company applicants.

A company applicant can either be a direct filer or an individual who directs or controls the filing action. The following table clarifies the difference between the two:

Company Applicant Type	Explaination
Direct filer	Direct filer refers to the individual who directly submitted the company’s registration or creation document to the secretary of state or similar office.
Person who directs or controls the filing action	It’s the person who was primarily responsible for controlling the creation or registration filing. This individual only needs to be included in the report if more than one person was involved in the company’s formation.

Taking into account everything we’ve mentioned so far, it doesn’t come as a surprise that many organization owners find the BOI reporting process quite daunting. There are many intricacies to consider before filing your report, which is only the first step. Once an initial report is filed, the reported information must be updated in case of any changes to your beneficial ownership structure or individual owner’s information.

Failing to keep your BOI report accurate and updated can result in violating the CTA and corresponding civil or criminal penalties. The good news is that you can minimize this risk. If you want to make the BOI reporting process effortless, Harbor Compliance can help.

BOI Reporting Service by Harbor Compliance

Outsourcing BOI reporting to a team of experts ensures significant time savings and peace of mind. Our BOI Reporting Service lets you enjoy these benefits and effortlessly meet all the necessary CTA requirements. When you sign up, we will:

1. Gather your company’s beneficial ownership information
2. Submit the initial BOI report on your behalf
3. Provide ongoing support to ensure the information you report stays accurate and up to date at all times

You can sign up for the service regardless of your company’s size or ownership structure. Whether you run a small business, multinational organization, or nonprofit that isn’t 501(c) exempt, we can take over BOI reporting to help you focus on core business operations.

Reporting BOI Yourself vs. Partnering With Harbor Compliance

Organization owners are typically swamped with work and don’t need another responsibility to think about. FinCEN estimates that submitting a BOI report can take up to three hours per entity, and that’s only the initial stage. If any of your reported information changes, you must then submit an updated report. And you only have 30 days to do so.

With Harbor Compliance, you don’t need to worry about any of this. Once we compile and send your initial BOI report, we’ll send you automated periodic reminders to check if there are any updates you need to report. If there are, we’ll submit an updated report in your name, drastically simplifying the process.

Harbor Compliance also makes it easy to track your company’s ownership and leadership information through the optional Records Manager add-on. If you opt for it, you’ll get a centralized hub for storing all the relevant information and having a clear overview of it.

How To Order the BOI Reporting Service

If you opt for our BOI Reporting Service, you can get started in minutes—all you need to do is complete a simple signup wizard.

First, choose from three available options based on your business structure and type:

1. Single business
2. Nonprofit that is not 501(c) exempt
3. Multiple entities

You’ll be taken to a form that lets you leave your contact details and company information. Fill it out and complete the checkout, and we’ll take it from there. After we gather the necessary information, you’ll get proof that your BOI report has been submitted and be able to enjoy our ongoing support.

Browse Our Service Portfolio for Additional Support

Harbor Compliance can help you meet numerous regulatory requirements besides BOI reporting. We offer comprehensive entity lifecycle management that streamlines lots of tasks, such as:

• Business name reservation
• DBA management
• Initial and annual report filing
• Document amendments
• Withdrawal

We also streamline communication with the secretary of state and other regulatory bodies in two ways:

1. Delivering your filings in person through the Drop-Off Filing Service
2. Obtaining important documents like your certificate of good standing, articles of reinstatement, and certified copies

Our Registered Agent Service is another popular solution that ensures service of process and official notices are delivered timely. We can appoint or change the registered agent on your behalf, so you can partner with us even if you already have an agent.

Other services you might find useful include the following:

• Business licensing support, which encompasses general business licenses and industry-specific ones (security, construction, engineering, and more)
• Tax-related services like obtaining an EIN, payroll tax registration, and sales and use tax registration
• Nonprofit incorporation and charitable registration with a 501(c) tax exemption

BOI Reporting FAQs

Here, you’ll find answers to some of the most frequently asked questions about beneficial ownership and the BOI reporting process. If you need additional guidance, explore our Information Center.

Make BOI Reporting Stress-Free With Harbor Compliance

Worrying about the many nuances of BOI reporting robs you of valuable time and energy. Sign up for our BOI Reporting Service, and you can keep focusing on impactful work while we handle the reporting process.

If you’re interested in any other services you saw here, you can reach out to us and inquire about them. It might be wise to get your free Harbor Compliance Score™ beforehand as it can give you a clear overview of your organization’s current regulatory standing and highlight any red flags worth addressing.

We also offer an advanced software solution that lets you maintain your licenses, streamline tax-related processes, and perform many other tasks effortlessly. To see how it works, schedule a demonstration today.