Form 5472 and the pro forma 1120, explained for a foreign-owned LLC

A foreign-owned single-member LLC usually owes no US income tax, which is why so many founders abroad first hear about Form 5472 from a penalty notice. This guide is here so you hear about it first.

Form 5472 is filed by a reporting corporation: a US corporation that's at least 25% foreign-owned, or a foreign corporation doing business in the US. For tax years beginning after 2016, a US disregarded entity owned by a foreign person is treated as a corporation for this purpose. In plain terms, a single-member LLC whose owner isn't a US person files Form 5472 every year.

An LLC with two or more members is a partnership. It files Form 1065 instead and doesn't file Form 5472. A C-Corporation that's at least 25% foreign-owned files Form 5472 along with its ordinary Form 1120.

It reports reportable transactions between the company and its foreign owner during the year: money the owner put in, money paid out to the owner, loans either way, and payments for anything between them. The IRS counts amounts paid to form or dissolve the company as reportable, so the fees you paid to set it up mean even a company with no sales usually has something to report. The form also identifies the company, the owner and the owner's country, including the owner's foreign tax number if they have one.

It's a report, not a tax. Whether the owner owes US income tax is a separate question, and for most foreign-owned service companies the answer is no, because the work is done abroad.

Form 5472 has to be attached to a corporate return, and a disregarded entity doesn't have one. So the IRS has it attached to a pro forma Form 1120: a Form 1120 with only the company's name and address and two items on page one, B and E, filled in, the words "Foreign-owned U.S. DE" written across the top, and Form 5472 behind it. The rest of the 1120 is left blank.

1. 1

   The pro forma 1120

   The company's name and address, item B (the EIN) and item E (total assets), with "Foreign-owned U.S. DE" written across the top. Nothing else.

2. 2

   Form 5472, Part I

   The company, as the reporting corporation: its name, EIN, address, tax year and total assets.

3. 3

   Form 5472, Part II

   You, the foreign owner, on the lines for the 25% foreign shareholder: your name, address, country of citizenship and residence, and the tax number your country gives you. The IRS's instructions say a foreign-owned LLC completes this part.

4. 4

   Form 5472, Part III

   You again, as the related party the company dealt with. The IRS requires this part even when the same person is already in Part II.

5. 5

   Form 5472, Part IV

   Money that moved between the company and you for the things listed: sales, services, rents, loans and the like. Leave it empty if nothing of that kind happened.

6. 6

   Form 5472, Part V

   Tick the box if there was any other transaction between you and the company, such as money you put in or took out. For most founders, the fees paid to form the company are the first.

7. 7

   Send it

   Fax it to 855-887-7737, or post it to Internal Revenue Service, 1973 Rulon White Blvd, M/S 6112, Attn: PIN Unit, Ogden, UT 84201. Keep the fax confirmation or the postal receipt.

The penalty is $25,000 for each Form 5472 that isn't filed on time, or is filed without the information it needs. If the failure continues more than 90 days after the IRS sends notice, another $25,000 is added for every 30 days, or part of 30 days, that it goes on. The IRS generally applies it automatically to late filings and removes it only if you can show reasonable cause. There's no exception for small companies, or for a company that earned nothing.

• A separate bank account from day one. Every reportable transaction is then a line on a statement, not something you have to piece together later.
• Paying yourself by recorded transfers, not by spending on the company card for personal things.
• Knowing when the forms change. Once there are two owners, the company is a partnership and files Form 1065 instead.
• Having the EIN well before April. The form needs the company's EIN, so a company still waiting for one near the deadline is filing under pressure.

The state's yearly charge: a $60 annual report in Wyoming, or a flat $400 tax by 1 June for a Delaware LLC, which files no report. Form 1099-NEC for each US contractor paid $2,000 or more by bank transfer or cheque in the year, the threshold since 2026. Sales tax returns in any state where the company is registered. An FBAR to FinCEN by 15 April, if the company's accounts outside the US held more than $10,000 between them at any time in the year. The usual case is a euro account in the company's name at a bank in your home country. A company that banks only in the US doesn't file one. And if the company does have effectively connected income, the owner also files a US income tax return, Form 1040-NR, and that's the point to hire an accountant.