Do banks require beneficial ownership information for opening partnership firm accounts?

Yes, banks must verify the identity of beneficial owners as part of KYC and PMLA compliance before opening accounts. This includes identifying natural persons holding 10% or more ownership or who exercise significant control. Accurate verification prevents money laundering and financial fraud and ensures the partnership complies with regulatory requirements before starting banking operations.

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Who is a Beneficial Owner in a Partnership Firm? PMLA Rules

Joel Dsouza

Updated:Feb 11, 2026

12 min read

In a partnership, not all partners have the same ownership or control over capital, skills, or decisions. This is why it’s important to know who is the beneficial owner in a partnership firm in India. Some partners may contribute more money, while others manage operations or make key choices.

A beneficial owner is the person who ultimately owns or controls the partnership and benefits from its profits and decisions. Under the Prevention of Money-Laundering Act (PMLA), 2002, it is “the natural person who ultimately owns or controls a client or on whose behalf a transaction is conducted. During Partnership Firm Registration, identifying the beneficial owner is crucial. If no partner qualifies, the senior managing official is usually treated as the beneficial owner.

This article outlines the legal definition, importance, and steps to identify a beneficial owner in a partnership firm.

Legal Definition of Beneficial Owner (Under PMLA Rules)

In India, the Prevention of Money-Laundering Act (PMLA) defines a beneficial owner in a partnership firm as a natural person who ultimately owns or controls 10% or more of the partnership’s capital or profits. A beneficial owner can also be someone who exercises significant control over the firm, even without meeting the ownership threshold. The focus is on identifying the real individuals behind the partnership, rather than just relying on names listed in official documents.

Maintaining clear records of beneficial owners is also essential for KYC, audits, and banking transactions.

Example: Suppose Partner A owns 30% of the profits, Partner B owns 25%, and Partner C owns 5% but controls daily operations and decision-making. Partners A and B automatically qualify as beneficial owners based on ownership, while Partner C also qualifies because of their control over the firm’s operations.

AML & KYC Rules for Financial Transactions in Partnership Firms

Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), and Anti-Money Laundering (AML) India require financial institutions to identify and verify the beneficial owners of partnership firms. These measures ensure transparency in financial transactions and prevent misuse of partnerships for money laundering or other illegal activities.

For banks, Financial Institutions (FIs), and regulated entities, identifying beneficial owners is crucial because it:

Helps fulfill KYC and due diligence obligations
Mitigates the risk of fraud and regulatory penalties
Ensures compliance with AML/CFT norms

Effective identification of beneficial owners helps institutions maintain financial integrity and comply with legal requirements.

IFSCA AML/CFT & KYC Guidelines for Partnership Firms in IFSCs

The International Financial Services Centres Authority (IFSCA) issues detailed guidelines for identifying beneficial owners in partnership firms operating within International Financial Services Centres (IFSCs). These guidelines follow global AML/CFT standards.

IFSCA Guidelines for Identifying Beneficial Owners

Ownership and Control Criteria: IFSCA identifies beneficial owners based on their ownership percentage or significant control over the partnership.
Documentation Requirements: Firms must maintain clear records of individuals who exercise substantial influence or decision-making power. This applies even if they do not meet the ownership threshold.
Compliance Obligations: Regulated entities must follow AML/CFT compliance and KYC standards. They must verify and document all beneficial owners operating within IFSCs.

Identifying the true beneficiaries of a partnership reveals who drives decisions and controls profits. This ensures the firm remains transparent, accountable, and protected from misuse.

Why Beneficial Ownership Matters in a Partnership Firm?

Knowing the beneficial owner in a partnership firm helps identify who truly controls the firm and who benefits from its profits.

Here’s why it is so important:

Regulatory Compliance: Partnership firms need to disclose the percentage of beneficial owners in a partnership firm to comply with PMLA and KYC rules. Banks, auditors, and government authorities check this information to prevent money laundering and financial fraud. Maintaining accurate records ensures the firm avoids penalties and legal complications.
Transparency and Trust: Clear ownership percentages make it easy for partners, investors, and regulators to see who holds real control. This transparency reduces disputes over profit sharing, decision-making, and management responsibilities.
Fraud and Risk Prevention: Tracking the beneficial owner in a partnership firm prevents misuse of the partnership. It ensures partners cannot hide assets or manipulate operations. Regulators can quickly identify who truly benefits, minimizing financial and legal risks.
Global Compliance Standards: International bodies, such as the Financial Action Task Force (FATF), require clear disclosure of beneficial ownership percentages. Partnerships that follow these rules stay aligned with global standards. This is especially important for firms dealing with foreign investors, international transactions, or cross-border business activities.

This clarity is vital for smooth day-to-day operations, staying compliant with regulations, and building trust among partners, investors, and authorities.

How to Identify a Beneficial Owner in a Partnership Firm: Step-by-Step Guide

Following a clear step-by-step process to determine the beneficial owner in a partnership firm helps partners, auditors, and regulators:

Step 1: Review Ownership Records

Check the partnership agreement and capital contributions.
Identify partners who own or are entitled to 10% or more of the firm’s capital or profits.

These partners automatically qualify as beneficial owners.

Step 2: Assess Control Beyond Ownership

Look for partners who hold less than 10% but influence key decisions or manage operations.

Control is as important as ownership in determining the beneficial owner.

Step 3: Identify Natural Persons

Only individual humans qualify as beneficial owners; companies, trusts, or other legal entities do not.
If no individual meets the threshold, the partnership can designate the senior managing official as the beneficial owner.

Step 4: Collect Required Documents

Gather and verify all documents needed to identify beneficial owners:

Copy of the Partnership Deed
Records of capital contributions for each partner
Details of profit-sharing percentages
Identification documents (PAN, Aadhaar, or Passport)
Agreements showing control or management rights
Minutes of meetings or internal resolutions reflecting decision-making authority
KYC documents for all beneficial owners

Step 5: Maintain Records

Document each beneficial owner’s stake percentage, control rights, and role in decision-making.
Keep these records updated for audits, KYC verification, and regulatory reporting.

Step 6: Update Regularly

Reassess whenever there are changes in partners, capital contributions, or management responsibilities.
Regularly updating records keeps the firm compliant with PMLA and reduces legal risks.

Note: Keeping records of beneficial owners up to date ensures compliance, transparency, and prevents legal or partnership disputes.

Reporting & Compliance Obligations for Beneficial Owners in Partnership Firms

Partnership firms must maintain transparency by reporting and disclosing information about their Beneficial Owners (BOs).

Knowing when and how to report BO details is crucial for all regulated entities:

When to Disclose Beneficial Owner (BO) Information to Regulators and Banks?

Firms must provide BO details at key stages to ensure transparency and meet regulatory obligations. Disclosure is required both for financial institutions and regulatory compliance processes.

Mandatory reporting to banks: Submit BO information when opening accounts or conducting significant transactions.
Business onboarding & compliance: Provide BO details during onboarding with regulators, partners, and during periodic compliance checks.

Penalties for Failing to Report Beneficial Owner Information

Failing to disclose or verify BO information can have serious consequences under Indian law. Entities that do not comply with AML/KYC reporting rules risk both administrative and criminal penalties.

Monetary fines: Non-compliance with PMLA reporting obligations can attract fines ranging from ₹10,000 to ₹1,00,000 or more per violation. In some cases, regulators may impose fines up to ₹5,00,000 or higher depending on severity and repeat offences.
Criminal liability: Money‑laundering offences under the PMLA carry rigorous imprisonment from 3 to 7 years and additional fines.
Regulatory action: Authorities may restrict operations, suspend licenses, or take other corrective actions against firms and responsible individuals.
Operational impact: Non‑compliance can damage credibility with banks and regulators, making future transactions and partnerships difficult.

Accurate BO reporting not only avoids fines and legal action but also builds investor confidence and supports secure, compliant business operations.

Beneficial Owner vs Legal Owner in a Partnership Firm

The legal owner is the person listed in official records, while the beneficial owner is the individual who actually controls the firm or enjoys its profits.

Here’s a quick comparison to help you understand the key differences:

Aspect	Legal Owner	Beneficial Owner
Definition	Person officially registered in partnership documents.	Natural person who ultimately controls the firm or enjoys its profits.
Control	Might not hold significant decision-making power.	Has actual control over operations, policies, or key decisions.
Profit Entitlement	May not receive profits proportional to ownership.	Receives profits directly or indirectly based on control or ownership.
Regulatory Relevance	Recognized for legal and statutory purposes.	Recognized for PMLA compliance, KYC, and financial transparency.
Example	Partner listed in the partnership deed but not actively involved.	Partner holding less than 10% ownership but managing operations and policies.

When identifying beneficial owners and maintaining proper records, choosing the right guidance can save time and ensure compliance. RegisterKaro helps partnerships stay organized by guiding you through PMLA compliance, KYC documentation, and record-keeping requirements.

Our team handles the complex paperwork, explains each step clearly, and ensures your partnership meets regulatory standards smoothly. Contact RegisterKaro today!

Frequently Asked Questions

Under the amended PMLA rules, a natural person who owns or is entitled 10% or more of the partnership’s capital or profits qualifies as a beneficial owner. Authorities also consider partners with less than 10% if they exert effective control over the firm. This threshold ensures transparency and prevents misuse of partnership structures for illegal or fraudulent activities.

Yes, even if a partner holds less than 10% ownership, they can be treated as a beneficial owner if they exercise control over the partnership’s management or policy decisions. Partnerships must check both ownership and control rights when identifying beneficial owners. This ensures that individuals cannot hide influence behind small shares and strengthens compliance with PMLA and KYC requirements.

No, a legal owner is the person whose name appears in official partnership documents, while a beneficial owner is the individual who actually controls the firm or receives its profits. A legal owner may not have real control over operations, whereas a beneficial owner may influence decisions indirectly. Distinguishing between legal and beneficial owners is important for audits, banking processes, and regulatory compliance.

A partnership determines beneficial owners by reviewing capital contributions, profit entitlement, and control rights. Partners with 10% or more of ownership usually qualify. Firms must also consider indirect control exercised by partners with lower ownership. Maintaining clear records of beneficial owners is essential for audits, KYC verification, and compliance with PMLA, ensuring that the true controllers of the firm are identified.

Yes, only individual human beings can be considered beneficial owners. Legal entities such as companies, trusts, or other partnerships do not qualify. If no individual meets the ownership or control threshold, the senior managing official of the partnership can be designated as the beneficial owner. This ensures regulatory compliance and that a responsible person is accountable for the firm’s operations.

Partnerships must maintain records of each beneficial owner’s ownership percentage, control rights, and role in decision-making. These records support audits, KYC compliance, and reporting to banks or regulators. Firms should update these records whenever there is a change in partners, capital contributions, or management responsibilities to ensure ongoing compliance with PMLA and to avoid penalties.

Partnerships should update beneficial ownership records whenever there are changes in partners, capital contributions, or management responsibilities. Regular updates help ensure compliance with PMLA and KYC rules, maintain accurate records for banks and auditors, and reduce the risk of penalties. Ongoing monitoring also ensures that the firm reflects the true controllers and beneficiaries at any given time.

Yes, a person can qualify as a beneficial owner through indirect ownership or control, such as holding interests via other entities or arrangements. PMLA rules consider both direct ownership and effective control when determining beneficial ownership. If a natural person influences decisions, policies, or profits through indirect arrangements, they must be reported as a beneficial owner in the partnership.

If a partnership does not identify and maintain records of beneficial owners, it risks non-compliance with PMLA and KYC regulations. This can result in regulatory penalties, fines, and difficulties in banking or audits. Correct identification ensures transparency, prevents misuse of the partnership, and protects the firm from financial and legal consequences. Accurate records also build trust with investors, authorities, and other stakeholders.

The beneficial ownership threshold in a partnership firm is 10% or more of the capital or profits. Any partner meeting this threshold automatically qualifies as a beneficial owner. Additionally, partners holding less than 10% can be considered beneficial owners if they exert significant control over decisions or operations. This threshold ensures that authorities can identify who truly controls or benefits from the partnership and maintains transparency.

Yes, partnership firms in India must disclose beneficial ownership information under PMLA and KYC rules. Banks, auditors, and government authorities may request this data for compliance, anti-money laundering, and audit purposes. Failing to provide accurate information can result in regulatory fines, legal complications, and difficulties in banking transactions. Disclosure ensures transparency and helps authorities track the actual controllers and beneficiaries of the partnership.

Yes, a managing partner can qualify as a beneficial owner if they meet the ownership threshold or exercise significant control over operations, decision-making, or policy implementation. Even if their capital contribution is below 10%, their role in daily management or strategic control can make them a beneficial owner. This ensures that authority and control, not just ownership, are considered when identifying the real beneficiaries of a partnership firm.

To identify a beneficial owner, partnerships typically need documents such as the partnership deed, KYC proof of partners (PAN, Aadhaar, or passport), capital contribution statements, and records showing roles in management or decision-making. Maintaining detailed records of ownership percentages and operational control is also essential. These documents help banks, auditors, and regulators verify the beneficial owner and ensure the firm complies with PMLA and KYC requirements.

RegisterKaro simplifies the process of identifying and documenting beneficial owners in partnership firms. Experts ensure accurate calculation of ownership percentages, proper recording of control rights, and compliance with PMLA and KYC rules. We handle all filings, audits, and record-keeping efficiently. With RegisterKaro, partnerships can stay fully compliant, reduce the risk of penalties, maintain transparency, and focus on smooth operations and business growth.