Owning a US LLC as a foreign person comes with specific tax and reporting obligations. While the US generally does not tax foreign owners of disregarded-entity LLCs on their worldwide income, there are several mandatory filings you must make each year. Failure to comply can result in significant penalties. Here is a comprehensive overview of every requirement you need to know about.
Federal Tax Obligations
1. Form 5472 + Pro Forma Form 1120
This is the most important annual filing for foreign-owned single-member LLCs. Form 5472 (Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business) reports transactions between the foreign owner and the US entity.
Key facts:
- Who must file: Every US LLC with a foreign owner that is treated as a disregarded entity
- What it reports: All transactions between the foreign owner and the LLC (capital contributions, distributions, loans, payments for services, etc.)
- Attachment: Must be filed with a pro forma Form 1120
- Deadline: April 15 (or October 15 with an extension via Form 7004)
- Penalty for non-filing: $25,000 per form, per year
- Cannot be e-filed: Must be faxed or mailed to the IRS
2. EIN (Employer Identification Number)
Your LLC needs an EIN to file Form 5472. If you do not already have one, you can apply using IRS Form SS-4. Foreign applicants without an SSN or ITIN can apply by mail or fax (not online). Processing takes 4-6 weeks by mail.
3. Effectively Connected Income (ECI)
If your LLC earns income that is "effectively connected" with a US trade or business, you may owe US federal income tax on that income. In that case, you would also need to file:
- Form 1040-NR: Non-Resident Alien Income Tax Return
- Potentially estimated tax payments throughout the year
Determining whether income is ECI depends on many factors, including the nature of the business activity and where it is performed. Consult a tax professional if you believe your LLC earns US-source income.
4. FIRPTA Withholding
If your LLC sells US real property, FIRPTA (Foreign Investment in Real Property Tax Act) withholding rules may apply. The buyer is generally required to withhold 15% of the purchase price.
Financial Account Reporting
5. FBAR (FinCEN Form 114)
If your LLC has a US bank account and you have signature authority over it, you may need to file an FBAR (Foreign Bank Account Report) if the aggregate value of all your foreign financial accounts exceeds $10,000 at any point during the year.
Note: From the US perspective, a foreign person's accounts outside the US are not reportable on FBAR. The FBAR is more relevant if you are a US person with accounts abroad. However, your home country may have similar reporting requirements for your US accounts.
6. Form W-8BEN
If your LLC earns certain types of US-source income (interest, dividends, etc.), your US payors may require you to submit Form W-8BEN to certify your foreign status and claim treaty benefits (if applicable).
State-Level Obligations
7. Annual Report or Franchise Tax
Most states require LLCs to file an annual report and/or pay a franchise tax or annual fee. The requirements vary significantly by state:
- Wyoming: Annual report, $60 minimum fee
- Delaware: Annual franchise tax, $300 flat fee for LLCs
- Florida: Annual report, $138.75
- New Mexico: No annual report required
- Texas: Franchise tax report (no-tax-due filing if revenue is below the threshold)
Failing to file state annual reports can result in your LLC being administratively dissolved by the state.
8. State Income Tax
Some states impose income tax on LLCs or their owners, even if the federal government does not. For example:
- California: Imposes an $800 minimum franchise tax on all LLCs registered in California, regardless of income
- New York: Has a filing fee based on the LLC's New York-source gross income
States like Wyoming, Nevada, and South Dakota have no state income tax, which is one reason they are popular for foreign-owned LLCs.
9. Registered Agent
Every state requires your LLC to maintain a registered agent with a physical address in that state. The registered agent receives legal and government correspondence on behalf of your LLC. If you do not have a physical presence in the state, you need to hire a registered agent service (typically $50-300/year).
Bookkeeping Requirements
10. Record-Keeping
The IRS requires you to maintain adequate books and records for your LLC. At a minimum, keep records of:
- All bank transactions (bank statements)
- Capital contributions and distributions
- Loans between you and the LLC
- Any payments for services, rent, or other amounts
- Formation documents and EIN confirmation
Retain records for at least 7 years. The IRS can assess penalties for Form 5472 violations without a statute of limitations if you fail to file.
Penalties Overview
| Obligation | Penalty for Non-Compliance |
|---|---|
| Form 5472 | $25,000 per form, per year |
| State annual report | Administrative dissolution of LLC |
| ECI without filing 1040-NR | Tax + penalties + interest on unpaid tax |
| State franchise tax (e.g., CA) | Penalties + interest + possible suspension |
Simplify Your Compliance
The most critical annual filing for most foreign-owned single-member LLCs is Form 5472 with the pro forma 1120. Filabl handles this filing for you: upload your bank statement, review the generated forms, and we fax them to the IRS. No CPA needed, no printing, no mailing.