Form 5472: the filing foreign LLC owners forget

Many foreign individuals open an LLC in Florida, Wyoming or Delaware believing that if the company has no U.S. income, there is nothing to file with the IRS. That is an expensive mistake.

Who must file

Form 5472 is filed by U.S. corporations that are at least 25% foreign-owned and, since 2017, also by single-member LLCs owned by a foreign person. For this purpose the LLC is treated as a corporation and files Form 5472 with a pro forma Form 1120, which is only a cover sheet.

Even without income

The requirement does not depend on the LLC earning money but on transactions between the company and its foreign owner. The capital contribution to open the account, a loan from the owner or a withdrawal of funds are all reportable transactions. That is why almost every foreign-owned LLC must file from its first year.

Deadline and penalty

It is due by April 15 of the following year, with an extension to October 15 using Form 7004. The penalty for not filing, or for filing an incomplete form, is $25,000 per form per year, and the IRS assesses it automatically.

EIN and ITIN

The LLC needs its employer identification number (EIN) to file. The owner needs an ITIN only if a personal return is required, for example because the LLC has income effectively connected with a U.S. business. That analysis is the first one worth doing when the company is formed.