FAQ for Non-U.S. Founders (Ecommerce, Subscriptions, Stripe, U.S. Manufacturing/Fulfillment)
If your U.S. LLC is owned by a foreign individual or foreign company and you sell products to U.S. customers (even via a U.S. manufacturer or fulfillment partner), you may have U.S. filing obligations like Form 5472 + pro-forma Form 1120, plus sales tax registration in multiple states. This FAQ explains what’s required, what triggers U.S. income tax, and how to set up bookkeeping correctly.
Quick definitions
Foreign-owned U.S. LLC (single-member): A U.S. LLC with one owner who is not a U.S. person (either a non-U.S. individual or a foreign corporation). For U.S. income tax, a single-member LLC is disregarded by default (meaning the IRS looks “through” the LLC to the owner, unless an election is made).
- Ecommerce/subscription product business: You sell physical goods (like jewelry), often using:
- Stripe (payments),
- a contract manufacturer (produces your goods), and/or
- a 3PL/fulfillment center (stores/ships to customers).
FAQ 1) My U.S. LLC is 100% owned by a foreign company. What do I have to file every year?
In many common foreign-owned single-member LLC setups, the most overlooked “must-file” item is:
- Form 5472 + a pro-forma Form 1120 (information filing)
If a foreign person owns a U.S. entity that is treated as a “reporting corporation” for Form 5472 purposes, the IRS generally expects Form 5472 filed with a pro-forma Form 1120 when there are reportable transactions with the foreign owner (more on that below).
Why this matters
Form 5472 is not “income tax.” It’s an information return meant to disclose related-party activity. The IRS can assess significant penalties for failing to file it properly and on time.
FAQ 2) What’s a “reportable transaction” for Form 5472?
For foreign-owned structures, common reportable transactions include:
- Owner capital contributions (money the foreign owner injects into the U.S. LLC)
- Owner withdrawals/distributions (money moving from the LLC to the foreign owner)
- Intercompany charges (management fees, IP/license fees, reimbursements, cost allocations)
- Loans between the foreign owner and the U.S. LLC
Even if your revenue is low—or even zero—these owner-to-LLC cash movements can still create a Form 5472 filing obligation.
FAQ 3) What’s the penalty if we miss Form 5472?
The IRS penalty is large and can compound:
- $25,000 for failure to file (or filing a substantially incomplete return), and
- an additional $25,000 for each 30-day period the failure continues after IRS notice (up to certain limits/conditions).
This is why foreign-owned LLC compliance is often “high penalty, low drama”—the filing itself can be simple, but missing it can be expensive.
FAQ 4) Do we owe U.S. income tax if we sell products to U.S. customers?
It depends—this is where USTB/ECI analysis matters.
The honest rule: You don’t determine U.S. income tax purely by “where the customer is.” You look at whether the foreign owner (through the LLC) is engaged in a U.S. trade or business (USTB) and whether income is effectively connected (ECI).
Practical risk factors that often push toward U.S. income tax exposure
- You have U.S. employees or a dependent agent who can bind the business
- The business has a U.S. office/location (even a small one)
- A U.S. party is doing more than “routine services” and is effectively operating your U.S. business
Important nuance: Using a true independent contract manufacturer/fulfillment provider can reduce risk, but it does not automatically eliminate U.S. income tax exposure—especially where inventory, shipping, and operational control in the U.S. are involved.
FAQ 5) If we don’t owe U.S. income tax, do we still need bookkeeping?
Yes—good bookkeeping is not optional for foreign-owned U.S. entities because:
- You must track owner contributions/withdrawals (Form 5472 reporting),
- You need clean books to support any position taken on U.S. income tax (or non-taxability),
- You may need state filings, sales tax filings, contractor reporting, or payroll later.
For product businesses, bookkeeping must also cleanly separate:
- Revenue (Stripe sales, subscriptions, refunds/chargebacks)
- COGS (manufacturing invoices, landed costs, packaging)
- Fulfillment fees (pick/pack/ship, storage, returns processing)
- Merchant fees (Stripe fees)
- Advertising/affiliate payouts
FAQ 6) Sales tax: do we need to register in every state?
Potentially, yes—over time.
Most states apply economic nexus rules (post-Wayfair) and require out-of-state sellers to register once they cross a threshold—often based on dollar sales and sometimes transaction count. A commonly seen threshold is $100,000, but thresholds vary by state.
The real-world workflow
- Track sales by state using the ship-to address.
- When you exceed a state’s threshold, register for a sales tax permit.
- Begin collecting and remitting sales tax on that state’s taxable sales.
- File on the assigned frequency (monthly/quarterly/annual).
Is there a multi-state shortcut?
Some states participate in the Streamlined Sales Tax system, which can simplify registration and administration for member states.
Should we do this manually?
If you’re selling into many states, manual filings become error-prone fast. Many ecommerce operators use automation tools (and/or a specialist) to handle rate calculation and return filings—because missed sales tax filings can trigger penalties and notices.
FAQ 7) If our foreign parent owns the U.S. LLC, can the parent’s finance team access the U.S. books?
Yes. Most accounting platforms allow multiple users with role-based access. You typically grant:
- your U.S. accountant access for reconciliation/reporting, and
- your overseas finance team access for reporting, consolidation, and audit trail.
FAQ 8) Should we elect the U.S. LLC to be taxed as a corporation?
This is a strategy question—often driven by non-U.S. tax consequences, withholding considerations, and administrative preferences.
FAQ 9) What should a foreign-owned product business do in the first 30 days?
Here’s a practical launch checklist:
Compliance + tax posture
- Confirm the ownership chain and entity classification
- Map U.S. touchpoints (inventory location, fulfillment, who ships, who controls what)
- Decide whether you need a USTB/ECI analysis now or after 60–90 days of activity
Books
- Implement accounting software + a basic chart of accounts for ecommerce
- Connect bank + Stripe + expense feeds
- Track owner contributions/distributions cleanly from day one (Form 5472 support)
Sales tax
- Set up state-by-state sales reporting
- Identify target states where you expect fast nexus
- Choose an automation method early if you’re scaling quickly
Want this set up correctly (books + filings + a clear compliance plan)?
A clean setup now prevents expensive cleanup later—especially with Form 5472 penalty exposure and multi-state sales tax. Book a paid consultation here:
https://oandgaccounting.com/appointment-booking-form/
