How to determine company ownership
Each day surety companies issue numerous surety bonds on behalf of their agents. In most cases, they require what’s called corporate indemnity as a condition to issue a bond on their paper. You can learn more about indemnity agreements here but they’re basically a promise to reimburse your surety company if they pay claims on your behalf. Additionally, most sureties will require the owners to sign personally. This makes it especially important for a surety company to know the exact ownership structure of your company. We’ll discuss of few of the ways they do this in the following paragraphs.
State Corporation Websites
For this method, we’ll use the State of Florida’s corporation website called Sunbiz.org. Surety companies often review this website to determine the ownership structure of your company. However, it often gives little information about the actual ownership. For example: Sunbiz attaches a copy of the articles of organization, incorporation, etc. when your company initially files with the state. In the case of a corporation, the articles usually list the President, Secretary, and other important positions. Unfortunately, these positions often require 0% ownership by the individual listed. Meaning, you can be the President of a company and have absolutely no ownership of it.
While state corporation websites are often a good starting point, they shouldn’t be used to find actual ownership. They usually don’t contain the information needed to make a correct determination. Admittedly, some state websites do a better job than others and this section focuses on the Sunbiz website only.
Client Statement/Application
This method involves taking the client’s word for it. It appears most frequently when a client is applying for a small amount of credit. The application includes a section where the client fills in the ownership percentages of his or her company. It’s very convenient for the client but very unreliable.
Operating Agreement or Corporate Bylaws
This is perhaps the best way to determine ownership of a company. Operating agreements usually state each person or entity’s ownership percentage. In most cases, it also spells out voting rights, each persons role in the company, and other helpful information. However, the original operating agreement does not account for any amendments which have occurred since its issuance. Amendments to the operating agreement are the result of changing it in one way or another. These changes include purchase and sale agreements among other things which impact the business’ operations.
Conclusion
In the end, determining a company’s ownership structure at any given time can be difficult. You may find that it’s completely appropriate to take someone at their word if the risk of doing so is small. If not, you may want to dig a little deeper and request the operating agreement which spells out the ownership structure. However, it’s very hard to overcome someone who tries to conceal or hide this information. Most state websites don’t provide enough information, client statements are based entirely on trust, and operating agreements/bylaws can always be amended.