Foreign Owners of United State LLC – The Need To File Form 5472 and Form 1120

IRS recently introduced a new filing requirement mainly for foreign owners of US Single Member LLCs. The new requirement took effect for tax year 2017 and beyond; under the new law foreign owners of US SMLLC or disregarded entities will now be required to file form 1120 together with filing of Form 5472 which is mainly for informational purposes

Foreign Owned Businesses United State LLCs – considered as a domestic corporation for the reason of compliance

Brief introduction: single owner of United States LLCs are considered by internal revenue service as disregarded entities. Not like corporations, prior to this new law, it was actually not necessary for disregarded entities to obtain Employer Identification Number (EIN), neither is their filing requirement different from the individual that owns them, normal filing requirements.

But the recent changes now require foreign owners who do not have United States tax filing requirement, such an individual disregarded entity will now be required to file form 1120 and 5472

Form 5472 is not a new development, even though some modifications were done to include additional disclosure.

form 5472 application was originally limited to disclosure of foreign ownership in a US Corporation or corporations that files 1120-F; but now its usage has extended pass corporations and now have a far reaching compliance requirement for foreign business owners with disregarded entities (LLC)

Form 5472 And Form 1120 filling procedure exist, irrespective of United States tax filing obligation (1040,1040NR or 1120-F)

Foreign owners of united state disregarded entities might not have any income tax filing obligation (Form 1040,1040NR or 1120-F) in the absence of US sourced income , FDAP or US Effectively Connected Income , nevertheless, form 5472 (with form 1120, explained below) are required irrespective of your tax filing requirement in the US

Foreign-owned US disregarded entities are requested to file a pro forma form 1120 and form 5472 attach to it. This procedure will take fulfills the filling obligation of the LLC and its related parties such as the Sole Member.

IRS has provided 2 methods of transmitting form 1120 and 5472, you can either fax the forms or mail them using the address provided in the 5472 Instructions

Logistics Filing– a brief explanation of EIN, ITIN, and W-7

To be able to file form 5472, it is mandatory that all applicable entities applies for an Employer Identification Number (EIN).

In situation where LLC is new, in order to file form 5472 there is need for the LLC to first obtain an Employer Identification Number (EIN) which is only possible when you file for form SS-4. Foreign owners need not have an ITIN or SSN in order to obtain an EIN.

Below are frequently asked questions (FAQ)

1. when is the due date for form 5472 and Form 1120?

Normally April 15th is the due date of form 1120 every year (form 5472 should always be filed as an attachment to form 1120).

2. Can there be an extension period?

Yes – is possible to file for an extension period of additional six months through form 7004.

3. From which year will I be required to do my filing?

It is important to note that the recent reporting requirements commenced on January 1, year 2018, covering the taxable years starting from January 1, 2017.

New Compliance Alert!!: On January 1, 2024, the Financial Crimes Enforcement Network (FinCEN) announced the commencement of beneficial ownership information (BOI) reporting under the Corporate Transparency Act (CTA). This vital step forward ensures greater transparency and aids in the fight against illicit financial activities. Companies established or registered in the U.S. are required to comply with these reporting standards, contributing to a more accountable corporate environment.Learn more and seek guidance here.

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