Understanding the ownership structure of a company we want to do business with is key during business verification. In some cases, it's a straightforward process that grants transparency instantly. In others, it might be a cumbersome task. The complexity of the ownership structure aims to hide potential links to illicit activities or people involved in it. Conducting due diligence on the business structure helps to verify the legitimacy of your potential partner. It ensures that they're not involved in fraudulent activities and the owners have a sound financial background.
Ownership structure refers to the way a business is organized and owned. It outlines how the ownership is divided among individuals or entities involved in the company. Identifying it is crucial as it shows who's the decision-maker, who controls the company's assets, and who reaps the benefits of its success. In the context of KYB, identifying ownership structure helps to determine beneficial owners and people with significant control that should be verified during the KYB process.
Sole Proprietorship - The business has a single owner. It holds complete control and bears all responsibilities and liabilities.
Partnership - That’s the type of business where ownership is divided between two or more individuals. The responsibilities and profits are shared accordingly. Partnerships can be general (equal responsibility) or limited (unequal responsibility).
Corporation - A corporation is a separate legal entity from its owners with ownership defined through shares of stock. It’s a more complex structure with a board of directors and officers.
The overview of ownership structure helps to identify and verify the most important personas behind the business and verify the business’s legitimacy.
Analyzing the business structure as part of KYB helps assess the potential risks associated with a partner. Understanding who holds significant control in the company and their backgrounds allows businesses to evaluate the risk of financial stability, legal issues, or their links to illicit activities.
For financial institutions, knowledge of the ownership structure helps in decision-making processes. Especially those related to approving transactions, setting credit limits, and managing financial risks.
Identifying ownership structure involves checking the percentage of ownership each party holds in a business. This information can be found in legal documents like the articles of incorporation, or partnership agreements. This data can even be found in financial reports. Key indicators include the number of shares owned by each shareholder. Important aspects are also the voting rights associated with ownership, or the percentage ownership stake of each partner in a partnership.
The shareholder register helps to identify the business structure of corporations. This document provides a detailed list of all shareholders. It includes their names, addresses, the number of shares they hold, and the percentage of ownership they have in the company.
This information is also listed in government agencies, databases, and, to some extent, in public registries.
An ownership structure chart visually represents the distribution of ownership in a business. It typically includes the names of the owners or shareholders and the percentage of ownership each holds. This chart gives a quick overview of the hierarchy and relationships within the company.
Dotfile provides end-to-end business verification including the identification and verification of owners. Depending on the compliance and business needs, you can define the due diligence process for UBOs, shareholders, and other important entities. Our intuitive platform features an interactive business structure graph. It gives a high-level overview of the case. Dotfile allows you to automate KYB, discover and verify UBOs, and understand the risk associated with them. It all contributes to making informed decisions.
The ownership structure analysis is a key step of the KYB process. By understanding the ownership dynamics, businesses can mitigate risks and ensure compliance. It allows to build more secure and transparent business relationships. Dotfile helps businesses verify business counterparties and their owners anywhere in the world. Book a demo to see how we can help you.