Form 5472 exists to track transactions between US corporations (including LLCs treated as corporations) and their foreign owners. The filing requirement kicks in at the 25% threshold: if any foreign person owns 25% or more of the entity, Form 5472 applies. For single-member foreign-owned LLCs the answer is automatic (one owner holding 100% is obviously 25% or more), but the rule has subtleties for multi-owner situations, constructive ownership, and entity-owned entities.
TL;DR
- Form 5472 applies if a foreign person owns 25% or more of a US corporation or a foreign-owned US disregarded entity, per IRC §6038A.
- "Foreign person" means a non-US-citizen, non-US-resident individual; a foreign corporation; a foreign partnership; or a foreign trust.
- "25%" can be direct ownership OR constructive ownership through related parties (attribution rules).
- For single-member foreign-owned LLCs, the owner holds 100% and the rule is automatically triggered.
- For multi-owner LLCs with mixed US and foreign owners, Form 5472 triggers if ANY single foreign owner reaches 25%, individually or by attribution.
The statutory rule
The governing statute is IRC §6038A(a), which applies to any "reporting corporation" with a "25-percent foreign shareholder." A reporting corporation is a domestic corporation (or domestic DE treated as one under Treas. Reg. §1.6038A-1(c)(1)).
The "25-percent foreign shareholder" is defined in §6038A(c)(1) as any foreign person (individual, corporation, partnership, or trust) who at any time during the tax year owned — directly OR constructively under the attribution rules of IRC §318 — stock meeting either:
- At least 25% of the total voting power of all classes of stock entitled to vote, OR
- At least 25% of the total value of all classes of stock.
For an LLC treated as a corporation for Form 5472 purposes (which all DEs are, per the 2017 TCJA amendment to §1.6038A-1), "stock" maps to "membership interest." A 25% member of an LLC is a 25% shareholder for §6038A.
The single-member LLC case (100% automatic)
For a single-member LLC with one foreign individual owner, the analysis is trivial: the owner holds 100% of the membership interest, which is obviously 25% or more. Form 5472 applies every year the LLC exists with a foreign owner.
This is the most common foreign-owned LLC structure on platforms like Stripe Atlas and Doola. If you are a non-US person who formed a US single-member LLC through any of these services, §6038A applies to you automatically.
The multi-member case
Multi-member LLCs require a closer look. Consider a US LLC with two members:
- 50/50 US-foreign: One US person owns 50%, one foreign person owns 50%. The foreign member is a 25% shareholder (50% > 25%). Form 5472 applies.
- 80/20 US-foreign: US person owns 80%, foreign person owns 20%. The foreign member is NOT a 25% shareholder (20% < 25%). Form 5472 does NOT apply based on this ownership alone.
- 70/30 US-foreign: Foreign member at 30% exceeds the threshold. Form 5472 applies.
For LLCs treated as partnerships (most multi-member LLCs), the LLC itself files Form 1065, not Form 5472. But a multi-member LLC that elects to be taxed as a corporation can trigger the §6038A filing requirement if it has a 25% foreign shareholder.
Constructive ownership (the attribution rules)
§6038A incorporates the attribution rules of IRC §318. This means you can be a 25% shareholder without directly owning any membership interest, if the interest is attributed to you through family, entities, or partnerships.
The main attribution rules that matter for Form 5472:
- Family attribution: An individual is treated as owning stock held by spouse, children, grandchildren, and parents.
- Entity attribution: Stock held by a corporation, partnership, estate, or trust is attributed (in whole or in part) to the owners of that entity.
- Chain attribution: Stock attributed to one person can be re-attributed to another under certain conditions.
Practical example: A US LLC is owned 80% by a US citizen and 20% by the US citizen's foreign spouse. Under family attribution, the foreign spouse is treated as owning the US citizen's 80% too, making the foreign spouse's total constructive ownership 100%. Form 5472 applies, even though the foreign spouse's direct ownership is only 20%.
The foreign-owned US DE rule (post-2017)
Before 2017, a foreign-owned single-member LLC with no US tax obligations did not have to file Form 5472 because the entity was disregarded and there was no "reporting corporation." This changed with the Tax Cuts and Jobs Act and the 2017 amendment to Treas. Reg. §1.6038A-1(c)(1).
Under the amended regulation, a domestic disregarded entity that is wholly owned by a foreign person is TREATED AS a domestic corporation separate from its owner, but ONLY for purposes of §6038A reporting. This means:
- The DE is a "reporting corporation" for Form 5472.
- The foreign owner is a 25% shareholder (actually 100%).
- Form 5472 applies.
- A pro forma Form 1120 is required as the return to attach Form 5472 to, even though the DE is otherwise disregarded.
This is the regulation that creates the entire foreign-owned single-member LLC filing obligation. Before 2017, it did not exist for many LLCs.
What counts as a "foreign person"?
From §6038A(c)(3), a foreign person is:
- A nonresident alien individual (not a US citizen, not a US green card holder, not substantially present in the US).
- A foreign partnership.
- A foreign corporation.
- A foreign trust or estate.
- Any person (other than a US citizen or resident) who is not a US person under IRC §7701(a)(30).
The most common case is a non-US-resident individual. US residents for tax purposes include citizens, green card holders, and anyone meeting the substantial presence test (roughly 183 days in the US counted with a formula).
Common edge cases
US citizen living abroad
Still a US person for tax purposes. A US citizen owning a US LLC does NOT trigger Form 5472 regardless of where they live, because they are not a "foreign person."
Dual citizen with foreign residency
If one of the citizenships is US, they are a US person. No §6038A.
US LLC owned by a foreign corporation
The foreign corporation is a "foreign person." If it owns 25% or more of the US LLC, Form 5472 applies. Additionally, the foreign corporation may have its own US reporting obligations.
US LLC owned by a foreign trust with US beneficiaries
The foreign trust is a foreign person. The US beneficiaries complicate analysis. For most situations, Form 5472 still applies to the LLC. Separate Form 3520 obligations may also apply to the beneficiaries.
Foreign student on F-1 visa temporarily in the US
F-1 visa holders are generally non-resident aliens for tax purposes for their first 5 years in the US, so they count as foreign persons. An LLC owned by an F-1 student is a foreign-owned LLC.
Digital nomad with US passport running LLC from abroad
US citizen = US person. No §6038A. But they still have personal US tax obligations based on worldwide income.
What if ownership changed mid-year?
§6038A(c)(1) says the test is whether the foreign person owned 25% or more "at any time during the tax year." If a foreign person crossed the 25% threshold at any point, Form 5472 applies for that year, even if by year-end they dropped below.
Example: US LLC owned 100% by a US citizen for the first six months of the year. In July, the US citizen sells 30% to a foreign buyer. At that moment the foreign buyer is a 25% shareholder. Form 5472 applies for that entire tax year.
Frequently Asked Questions
Does 25% mean exactly 25% or 25% or more?
25% or more. A foreign owner at exactly 25% triggers the rule.
My LLC has three foreign owners at 20% each. Does Form 5472 apply?
Direct ownership: no foreign person reaches 25%. But check attribution — if two of the three are family members, their ownership is aggregated and one of them will exceed 25% by family attribution. Without attribution, no §6038A.
Does it matter if the foreign owner has no US income?
No. Form 5472 is an information return about the LLC's transactions, not about the owner's personal tax status. The owner could owe zero personal US tax and the LLC still has the filing obligation.
If the LLC files Form 1065 (partnership), do we still need Form 5472?
Multi-member LLCs that are partnerships file Form 8865 for foreign partners, not Form 5472. Form 5472 is for entities treated as corporations (including disregarded entities treated as corporations for §6038A purposes).
How Filabl handles this
Filabl is designed for the single-member foreign-owned LLC case — the most common structure where the 25% rule is automatic. For multi-owner LLCs or structures involving foreign corporations, partnerships, or trusts, consult a tax professional; those cases have additional forms (Form 8865, Form 3520) that Filabl does not currently support.
This article covers the general §6038A ownership rules. Specific situations involving attribution through trusts, layered entities, or cross-border family structures should be reviewed by a qualified tax professional.