Does cascade of ownership indicate ownership?
<p>Does cascade of ownership indicate ownership?</p>
<p>Person A owns 100% shares of a business entity B. Business entity B owns a business entity C. Business entity C owns a house D.</p>
<p>Two questions please:</p>
<ol>
<li><p>Does the person A own house D, in legal terms?</p>
</li>
<li><p>Can the person A live in the house D without a rental contract from the business entity C?</p>
</li>
</ol>
<p>Thank you.</p>

<p>Likely not, unless A finds a jurisdiction with sufficiently lax accounting and taxation standards.</p>
<p>As described in the question, A, B, and C are <em>distinct</em> legal entitites. For <em>each entity</em>, the tax office would want to know what the revenue, expenses, and net income are. By providing a service (<em>use of the house</em>) free of charge between two entites of the shell construct, profits are moved from C to A. This is usually illegal.</p>
<p>The required paperwork might not have to look like a normal rental contract between a tenant and a landlord, since many questions are resolved by the ownership, but it would have to specify payments. The tax office should complain if they differ too much from the going market rate.</p>
<p>Consider that C might be a LLC, and that C might be a civil judgement against C. Someone would look at the assets owned by C, and that includes the house D.</p>

<p>If the business entities are corporations they are entities separate from person A. The management of corporation C may have never heard of A and may have rented to entity XYZ. Person A will need permission from C.</p>
<p>It might be easy to get that permission.</p>

<blockquote>
<p>Does the person A own house D, in legal terms?</p>
</blockquote>
<p>The legal owner of the house is entity C. But, person A is described for some legal purposes as an &quot;equitable owner&quot; or an &quot;indirect owner&quot; of house D.</p>
<p>For example, in international taxation, indirect ownership can often be considered for purposes of determining if a company is a controlled foreign corporation. Likewise, indirect ownership of entity C is relevant for purposes of federal diversity jurisdiction if entities B and C are LLCs rather than corporations.</p>
<blockquote>
<p>Can the person A live in the house D without a rental contract from
the business entity C?</p>
</blockquote>
<p>Person A does not have a legal right to live in house D without a rental contract or other permission from entity C. But if person A does so anyway, only entity C would have standing to sue person A in most cases for doing so, and person A could exert their indirect control of entity C to cause entity C to decline to bring suit to enforce its rights.</p>
<p>Person A could also use person A's indirect control of the entity C to cause entity C to ratify person A's use of house D after the fact on whatever terms and conditions person A desired (although this might not suffice if done after an alter ego veil piercing claim is asserted to defeat the alter ego claim).</p>
<p>However, if entity C does not enforce its rights and gets nothing in return, it has arguably made a fraudulent transfer of the fair market rental value of house D to person A during the time it was occupied by person A.</p>
<p>In an extreme case, person A's failure to have an agreement or express permission from entity C could even be a ground upon which a creditor could pierce the corporate veil and ignore the existing of the entities B and C argument that person A's disregard for corporate formalities has the effect of making entities B and C the alter egos of person A.</p>

rental-property rent ownership