What is a Beneficial Owner?

A designation of beneficial owner has to do with an individual or entity that is granted the use and title to properties, even though another person or business holds the legal title to the property. The beneficial owner is able to enjoy all the benefits of owning property, while the actual titleholder is free to focus on other matters as long as the property is being managed and cared for. Here are some examples of how the concept of a beneficial owner is employed.

Though beneficial owner has full ability to make decisions within the scope of the responsibilities delegated by the titleholder as long as the arrangement remains in force, there are certain restrictions. In terms of property, an agreement of this type can be ideal for someone who owns property that he or she rarely uses. The beneficial owner is empowered to take care of property taxes, live on the property, maintain any dwellings found on the grounds, and rent or lease portions of the property on the behalf of the titleowner. Generally, the beneficial owner will render some sort of scheduled accounting or status report to the titleowner; this ensures there are no miscommunications about the boundaries of the rights and responsibilities of the beneficial owner.

The principle of a beneficial owner also comes into play with securities as well. Perhaps the most common application would involve a brokerage firm. In this scenario, the owner of the security or securities would turn over management and control to the firm, allowing them carte blanche in the administration of the securities. For all practical intents and purposes, the brokerage firm has the benefits of owning a security for as long as the owner of record wishes to maintain the relationship. This creates a situation where the firm can deal with the securities in a manner that is in the best interests of the owner of record and the firm, without having to consult the actual owner on every little detail.

Beneficial owners also may be involved in the management of intellectual property as well, such as book manuscripts and other writings. For example, an author may choose to transfer a specified list of rights to an employer or other copyright owner, while still retaining some degree of interest in the usage of the writings. This is not unusual when a writer is on the staff of a print or online publication, where the writings become copyrighted material for the employer. Generally, the author may retain reprint rights and usually is granted a byline, thus retaining some control of the property, but still allowing the copyright holder to utilize the material in applications associated with the business operations of the copyright holder.