A Certificate of Beneficial Ownership (CBO) form is a crucial document required by financial institutions to disclose information about the individuals considered beneficial owners of a business entity. This form is essential for obtaining financing and opening business bank accounts as it helps prevent financial crimes like tax evasion, terrorist financing, and money laundering. The Financial Crimes Enforcement Network (FinCEN) mandates the use of CBO forms, and they must be filed by corporations, LLCs, and similar legal entities operating within the US.
How a CBO form works and when it is used:
When presented with a CBO form, the signer needs to outline the ownership structure of the business entity and verify the beneficial owners within that legal entity. Individuals with significant management responsibility, such as CEOs, CFOs, COOs, and other key decision-makers, are required to sign the form. The form is typically used when a financial institution needs to verify ownership information before entering into a financial agreement, applying for financing, or opening bank accounts for a business.
Example of information required on a CBO form:
Common information required on a CBO form includes the legal name, physical address, date of birth, Social Security number, and a copy of a government-issued ID for each person named on the certification. These details are necessary to verify the identities of beneficial owners and ensure compliance with FinCEN regulations.
Common terms associated with a CBO form:
Key terms associated with a CBO form include beneficial owner, legal entity/entity type, ownership percentage, and control person. Beneficial owners are individuals or entities with significant ownership or control over a company, while legal entity types include corporations, partnerships, and LLCs. Ownership percentage refers to the amount of ownership an individual or entity has within a company, and control persons are beneficial owners with substantial influence over the company.
Frequently asked questions (FAQs):
– Do you need a certificate of beneficial ownership form for an LLC?
Yes, if an LLC is seeking a loan or a business bank account, a CBO form will be legally required for business financing or banking purposes.
– How do you confirm beneficial ownership?
Beneficial ownership is verified through various processes, including gathering information, verifying identities, researching ownership, and performing checks. A CBO form is one method of verifying ownership.
– Who qualifies as a beneficial owner?
Generally, anyone who directly or indirectly owns 25% or more of a company is considered a beneficial owner.
Bottom line:
A CBO form is a vital document that verifies ownership and control within a company, required for obtaining financing or opening business bank accounts. It is essential for compliance with FinCEN regulations and ensuring transparency in business transactions. If you’re considering applying for a small business loan, be prepared to provide a CBO form as part of the application process.