Reading Indirect Ownership on a Form 4: By LLC, Trust, Foundation

One of the most common ways to misjudge an insider's stake is to read only the "direct" line on a Form 4 and ignore everything held indirectly. A CEO might show a modest number of shares held directly while controlling millions more through an LLC, a family trust, or a foundation. If you stop at the direct column, you can dramatically undercount how much of the company the insider actually controls — and reach the wrong conclusion about a sale or a transfer.

This guide explains how Form 4 separates direct from indirect ownership, what the "by LLC," "by Trust," and "by Foundation" designations mean, and how to add up an insider's true position when you are reading their filing history.

Direct vs Indirect Ownership

Every Form 4 reports an insider's holdings using a field called "Nature of Ownership," which is either direct ("D") or indirect ("I"). Direct ownership means the shares are held in the insider's own name. Indirect ownership means the shares are held through some other entity that the insider controls or benefits from — but which still counts as the insider's beneficial ownership under SEC rules.

The SEC requires reporting of indirect holdings because beneficial ownership is about control and economic interest, not just whose name is on the certificate. An insider who holds shares through a wholly-owned LLC beneficially owns those shares just as surely as the ones in their personal brokerage account.

What the Indirect Labels Mean

When ownership is indirect, the Form 4 footnotes specify the holding vehicle. The most common are:

• By LLC. Shares held through a limited liability company the insider owns or controls. Founders frequently route large blocks through personal holding LLCs.
• By Trust. Shares held in a family trust, revocable trust, or grantor retained annuity trust. The insider is usually the trustee or a beneficiary.
• By Foundation. Shares held by a charitable foundation the insider established or controls, often as co-trustee. These are typically earmarked for philanthropy.
• By Children's Trust / Family Trust. Shares held for the benefit of family members, where the insider may serve as trustee but sometimes disclaims beneficial ownership.

Each of these is still part of the insider's reportable beneficial ownership, even though the shares are not in their own name — with the nuance that an insider can formally disclaim beneficial ownership of certain trust holdings, which the footnotes will note.

A Real Example

Take Ernest Garcia III, CEO of Carvana (CVNA). His Form 4 filings show a direct holding of several million Class A shares, but that is far from his full position. He also holds shares indirectly through the Ernest C. Garcia III Multi-Generational Trust III and the Ernest Irrevocable 2004 Trust III, where he serves as investment trustee. A reader who counted only his direct shares would understate the family's stake — and that is before accounting for the much larger position his father controls separately.

The same pattern appears at Arista Networks, where CTO Kenneth Duda holds shares directly plus large indirect positions through a children's trust and a 501(c) foundation. And at the largest scale, Mark Zuckerberg holds the bulk of his Meta stake indirectly through a web of Chan Zuckerberg entities — CZI Holdings, the Mark Zuckerberg Trust, and several Chan Zuckerberg Holdings LLCs. His direct holdings are a tiny fraction of his true control.

How to Add Up the Full Position

To get an insider's real stake from a Form 4, do this:

• Read both the direct and indirect lines. Each row shows a "shares owned following transaction" figure. The indirect rows are separate from the direct row — add them up.
• Identify each vehicle in the footnotes. The footnotes name every LLC, trust, and foundation and explain the insider's relationship to it.
• Watch for disclaimers. If a footnote says the insider "disclaims beneficial ownership," those shares are reported for transparency but the insider is asserting they are not economically theirs — count them carefully.
• Account for share classes. For dual-class companies, indirect holdings are often in the super-voting Class B, which carries control far beyond the economic value alone.

Why It Matters

Indirect ownership is where founder and executive control usually lives. The direct line on a Form 4 is frequently the smallest part of an insider's holdings, with the real weight sitting in LLCs, trusts, and foundations. An investor who reads only the direct column will undercount the stake, misjudge how much skin the insider has in the game, and potentially misread a routine transfer between vehicles as a sale. Always sum the direct and indirect lines, read the footnotes, and cross-check against the company's broader ownership on its stock holder page before judging an insider's commitment.

FAQ

What is indirect ownership on a Form 4?

Indirect ownership means an insider holds shares through an entity they control or benefit from — such as an LLC, trust, or foundation — rather than in their own name. It still counts as the insider's beneficial ownership under SEC rules and is reported as nature of ownership "I" on the filing.

What does 'by LLC' or 'by Trust' mean on a Form 4?

These footnote labels specify the vehicle holding an insider's indirect shares. 'By LLC' means a limited liability company the insider controls; 'by Trust' means a family or annuity trust; 'by Foundation' means a charitable foundation the insider established or co-administers.

Do indirect shares count toward an insider's stake?

Yes. Beneficial ownership is about control and economic interest, not just whose name is on the shares. Indirect holdings through LLCs, trusts, and foundations are part of the insider's reportable stake, though an insider may formally disclaim beneficial ownership of certain trust holdings.

Why do insiders hold shares indirectly?

Insiders use LLCs, trusts, and foundations for estate planning, tax efficiency, family wealth transfer, and philanthropy. For dual-class founders, indirect vehicles often hold the super-voting shares that secure control of the company.

How do I calculate an insider's total ownership from a Form 4?

Add the 'shares owned following transaction' figures from both the direct row and every indirect row, read the footnotes to identify each holding vehicle, watch for any beneficial-ownership disclaimers, and account for share classes since indirect holdings are often super-voting Class B stock.

Can reading only direct ownership mislead investors?

Yes. The direct line is frequently the smallest part of an insider's position, with the bulk held indirectly through LLCs, trusts, and foundations. Ignoring the indirect lines can cause investors to undercount a stake or misread a transfer between vehicles as a sale.