As a CPA, I’ve worked with more than a few of foreign-owned LLCs. Time and again, my clients ask me how to actually go about filing these forms.
Here’s a detailed answer:
1. Get an Employer Identification Number (EIN)
In order to file Form 5472, you have to apply for a U.S Employer Identification Number, or EIN. Just like any other company, the owner of a LLC must apply for an EIN by preparing and filing Form SS-4. That SS-4 application form has to be signed by what the IRS calls a “Responsible Party.” According to the IRS, a Responsible Party is “the individual who has a level of control over, or entitlement to, the funds or assets in the entity that, as a practical matter, enables the individual, directly or indirectly, to control, manage, or direct the entity and the disposition of its funds and assets.”
There are three ways you can submit Form SS-4:
Because a foreign-owned LLC’s registered agent has an office in the U.S., they can apply for an EIN online. However, this is only if the “Responsible Party” signing Form SS-4 has a valid U.S. Taxpayer Identification Number, or TIN.
Only LLCs without any residence, place of business, office, or agency in the U.S. can apply for an EIN via telephone. That means that most foreign-owned LLCs won’t be able to, given that the registered agent is in the U.S.
Any foreign-owned LLC can mail Form SS-4 to the IRS. By using this method, the LLC will get the EIN back in approximately two weeks.
- If your residence, place of business, office, or agency is located in the U.S., mail Form SS-4 to:
- Internal Revenue Service
- Attn: EIN Operation
- Cincinnati, OH 45999
- If you have no residence, place of business, office, or agency in the U.S., mail Form SS-4 to:
- Internal Revenue Service
- Attn: EIN International Operation
- Cincinnati, OH 45999
Faxing the application is a much faster route than mail. You can usually receive an EIN by fax within four business days. If after four business days you still haven’t gotten your EIN, then you may call the IRS to obtain the number.
- If your residence, place of business, office, or agency is located in the U.S., fax Form SS-4 to:
- Fax: (855) 641-6935
- If you have no residence, place of business, office, or agency in any state, fax Form SS-4 to:
- Fax: (855) 215-1627 (within the U.S.), or
- Fax: (304) 707-9471 (outside the U.S.)
2. Fill out Form 5472
Form 5472 can seem confusing and complicated . Here’s what to put where:
Part I: Information about the LLC
All reporting LLCs must complete Part I of Form 5472. This covers the name, address, and EIN.
- The address can be a foreign address. (It will almost certainly be the same address you used on Form SS-4.)
- The address should be somewhere the IRS can send notices to the responsible party, a nominee or someone affiliated with the LLC.
- You must also provide a description of the LLC’s business activity and corresponding code. (You can find those in the instructions for Form 1120.)
- Typically, a foreign-owned LLC that is engaged in e-commerce activities such as amazon FBA, Dropshiping, eBay, shopify sales etc. may use “Electronic Shopping & Mail-Order Houses” description and code 454110 .
- Check Line 3 of Part I to show that your LLC is a foreign-owned disregarded entity.
- Lines 1F to 1L of Part I is relevant to your LLC. Check box “1j” if this is the first year for which the LLC is filing a Form 5472
- On the issue of LLC residency, the IRS released International Technical Assistance (ITA) 200019042, which clarified that a single-owner LLC is a disregarded entity separate from its owner for federal income tax purposes, the LLC is not a person for purposes of U.S income tax treaties. The IRS further stated that the income of the single-owner LLC is taxable in the hands of the single owner, and not in the hands of the LLC. The LLC is not liable to tax within the meaning of U.S income tax treaties, and even under the domestic law. Therefore an LLC owned by a foreign person cannot certify that the LLC is a resident of the United States.
- Also, Make sure to review the instructions and fill out any lines that do apply, especially if your LLC has had transactions with multiple Related Parties.
Part II: Information about the Foreign Owner
Now you’ll need to complete Part II with the name and address of the LLC’s single foreign owner. This foreign owner may be:
- an individual who is not a citizen or resident of the United States,
- a company, association, partnership, or corporation that isn’t created or organized in the U.S., or
- a foreign estate or foreign trust.
If you don’t have a U.S. Tax Identification Number, you don’t have to enter one. However, the form may include your foreign Tax Identification Number. If you don’t have even a foreign Tax Identification Number, then just put “none” or “n/a” on Line 1(b)(3). But that’s only if you really don’t have one at all.
If you enter anything other than a U.S. Tax Identification Number, you’ll also need to enter a Reference Identification Number. That’s a number you come up with yourself. You don’t have to apply to the IRS for it.
This Reference Identification Number must:
- be 50 characters or less, and
- include only letters or numbers, no special characters or spaces.
You’ll have to use the Reference Identification Number every year, so be sure to write it down somewhere for next year.
Part III: Information about the “Related Party”
Next up, you have to complete Part III. Part III deals with the “Related Party” the LLC had reportable transactions with during the tax year. In most cases, that will be the foreign owner. Related Party can also be a U.S person, the completion of part III is mandatory.
However, the definition of Related Party is broad. For example:
- If a single member LLC is owned by a foreign company, a Related Party might be another company in the same controlled group.
- If an LLC is owned by a foreign trust, it might be the trust’s beneficiary and settlor.
- If an LLC is owned by a foreign individual, Responsible Parties might even include members of that individual’s family.
With that in mind, here’s what you have to do:
- Enter the name and address of the Related Party (Whether domestic or foreign) the LLC had reportable transactions with during the tax year, including the foreign owner already reported in Part II. Again, if the Related Party doesn’t have a U.S. Tax Identification Number, you’ll need to enter a Reference Identification Number.
- If the Related Party is an individual, you can ignore any references to business activity.
- Part III also requires the name of the country under whose laws the Related Party files income tax returns as a resident.
Note: You must file a separate Form 5472 for every Related Party the LLC had a reportable transaction with.
Parts IV, V and VI: Information about Reportable Transactions
Part IV is where you’ll list primary transactions.
Note: Most transactions listed on Part IV may not be applicable to a foreign owned disregarded entity. Next, you’ll have to check a box in Part V if the LLC has had any transactions with its owner or other Related Parties that are not listed in Part IV.
Part V request for ANY amounts paid or received in connection with the formation, dissolution, acquisition, and disposition of the entity, including contributions to and distributions from the LLC.
Part VI asks whether the LLC conducted any less-then-full or non-monetary transactions. If the answer is yes, you’ll have to detail those on an attached statement.
Part VII: Additional Information
Last, you’ll have to fill out Part VII. For the most part, you’ll just be checking “no,” but it’s important, nonetheless.
3. Fill out Pro Forma Form 1120
Compared with Form 5472, pro forma Form 1120 is a piece of cake. Because you’re a foreign-owned LLC, the IRS let’s you fill out Form 1120 with reduced information.
In fact, the only information they require on Form 1120 is:
- the name & address of the foreign-owned disregarded entity,
- the Employer Identification Number (EIN), and
- checkboxes for initial returns, final returns, or name & address changes
Once you’ve entered that information in, write “Foreign-owned U.S. DE” across the top of the form. Now it’s time to send the forms in.
4. Mail or Fax Forms 5472 and 1120 to the IRS.
Just attach your completed pro forma Form 1120 to Form 5472. Then, mail or Fax it in. If you decide to mail the forms, the standard Form 1120 mailing addresses won’t work. You can find the correct address in the filing instructions for Form 5472.
Note: Those addresses and Fax Numbers can change from time to time, so remember to check the most updated instructions each year. And that’s it! Congratulations, you’ve filed the correct forms for your foreign-owned LLC.
Sounds Complicated—how about a Little Help?
If this all sounds confusing—or you just don’t have the time—trust me, you aren’t alone. Every year, countless foreign persons turn to CPAs to help with filing for their single-member LLCs. And considering the penalties for getting it wrong, it’s worth doing. If you have any more questions, I’d be happy to answer them. I’m already helping several clients with foreign-owned single member LLCs, so I’ve learned a thing or two.
to contact me. I’ll gather all documents to prepare the required forms and fax or mail them on their behalf.
USA – INDIA F-1 & J-1 Tax Treaty (Students & Business Apprentice)
What Forms Do Foreign-Owned Single Member LLCs Have to File?
7 Common Questions about Foreign-Owned U.S. LLCs Answered—by a CPA
Amazon Foreign Sellers, US Taxation and 1099-K Reporting
The 12 Most Important Questions about U.S. LLCs Answered—by a CPA
Claim Tax Treaty, Avoid Double Taxation and Request VAT Exemption – The Magic of Form 6166 & 8802
Samples of U.S. Residency Certifications – Form 6166
15 Common Questions About Expatriation, Form 8854, and the Exit Tax—Answered by a CPA