Overview
ORCA can capture the distinctions between Full, Legal, and Economic ownership
Full Ownership
Full ownership means having both legal and economic ownership of a property. The owner has complete control over the property, including the right to use it, earn income from it, and transfer it to others.
Legal Ownership
Legal ownership refers to the person or entity whose name is on the property's title. This owner has to perform legal actions such as selling, buying, or transferring the property, but they may not necessarily benefit financially from it.
Economic Ownership
Economic ownership pertains to the person or entity that enjoys the financial benefits of the property, such as income, profits, and appreciation in value. This owner may not have their name on the title but still receives the economic benefits.
Example
Let’s use an example with properties named Sunny Villa and Azure Retreat:
- Full Ownership: Daniel has full ownership of Sunny Villa, which is valued at $1,500,000. He is listed on the title and enjoys all the financial benefits from the property, such as a rental income.
- Legal and Economic Ownership: John is the legal owner of Azure Retreat which is valued at $1,500,000, meaning his name is on the title. However, he has leased the property to his friend, Mike, and Mike receives all the rental income This makes Mike the economic owner, as he enjoys the financial benefits of the property.
- Since John is the legal owner of Azure Retreat, the value of the property is included in his net wealth. Therefore, John’s net worth is $1,500,000
How do we calculate ownership?
Management Accounting / Valuations
- Only full and legal ownership positions are included in the Management Accounting formula.
Effective Ownership Computation
- Only full ownership is considered in the effective ownership calculation.
Structure Pill Display
- The Structure Pill Display is the White circle showing the ownership percentage
- Any ownership type (Legal, Economic, Full) can be shown individually.
- Legal and Economic ownership can be displayed together in the pill.
- If full ownership exists, only full ownership is shown.
