What is a FinCEN Identifier and why is it so important?

Under the Corporate Transparency Act beginning January 1, 2024, certain entities will be required to file a Beneficial Owner Information Report (BOI). Entities that meet the definition of a “reporting company” and do not qualify for an exemption will be required to file a BOI.

Summarized, a domestic reporting company is a corporation, limited partnership, limited liability company, single member LLC, or any entity that was created by filing a document with a secretary of state that does not qualify for an exemption. A foreign reporting company is an entity (including corporation and limited liability company) formed under the law of a foreign country that has registered to do business in the United States by the filing of a document with a secretary of state or any similar office. There are many exemptions, but this article is focusing specifically on reporting companies.

Reporting companies are required to report specific information about the entity itself and beneficial owners.

Reporting companies must report:
  • Full Legal Name
  • Any trade name or DBA
  • Complete US address
  • State Jurisdiction of formation
  • IRS Employer Identification Number (EIN)
Beneficial Owners must report:
  • Full Legal Name
  • Date of Birth
  • Complete current residential address
  • Unique identifying number and issuing jurisdiction form, and image of one of the following:
      1. U.S. Passport
      2. State driver’s license
      3. Identification document issued by a state or local government

Here is where the FinCEN Identifier comes in. A FinCEN identifier is a unique identifying number that the FinCEN will issue to an individual or reporting company upon request after the individual or reporting company supplies the above information directly and separately to the FinCEN. As you might imagine, the repetition of the same information for a tiered partnership structure might be a cumbersome reporting obligation. Reporting entities would have to upload copies of images for possibly a handful of individuals over and over when the same individual is a beneficial owner in several related entities. Rather than have to list all the information for a specific beneficial owner and upload an image of their identifying document, the reporting company would only list the name of the beneficial owner and their FinCEN identifier number.  Think about how much more quickly and efficiently reporting companies could complete their required reports by using FinCEN identifiers!

Additionally, when the information an individual or reporting company reported to FinCEN to obtain a FinCEN identifier changes, the individual who had a change or the reporting company that had a change, must update or correct the reported information directly with the FinCEN. A change could be that the driver’s license is expiring, or there was an address change, or perhaps a name change. This change must be reported within 30 days, and the reporting entity must file an updated BOI report to record this change within the same time frame. The FinCEN understands that this is a new requirement so they are giving up to 90 days from the original report deadline to correct a mistake or omission without penalties for the upcoming reporting year.

FinCEN is actively assessing options to allow individuals to deactivate a FinCEN identifier so that they do not need to update the underlying personal information on an ongoing basis.

The FinCEN identifier is a time saver for reporting companies and it eliminates the need for individuals  to share their personal information with the reporting entities, as they only have to share their FinCEN Identifier number with the reporting entity. Having a FinCEN identifier for the reporting entity and the beneficial owners will streamline the reporting process and will help protect individuals’ personal information. Therefore, we strongly recommend that all reporting companies and beneficial owners register with FinCEN and obtain a FinCEN identifier.

One cannot access the FinCEN site to apply for a FinCEN identifier or submit a BOI Report until January 1, 2024, so  there is still some uncertainty regarding this new reporting requirement. However, we are certain that the report will have to be made electronically and it will have to include the items specified above.  Stay tuned for more information as it becomes available and as always, reach out to your HM&M Advisor for more details or specific questions.

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