US LLC Tax Obligations for Non-Residents

Foreign owners of US LLCs face a filing framework most domestic LLC owners never encounter. Miss the wrong form and the IRS issues automatic $25,000 penalties per filing, per year. Understanding which forms apply to your situation is the starting point before you can make any decision about running, maintaining, or closing your LLC.

What is Form 5472 and who must file it?

Form 5472 is an IRS information return required for any single-member LLC owned 25% or more by a foreign person or foreign entity. It reports reportable transactions between the LLC and its foreign owner: contributions, distributions, loans, and management fees. The deadline matches the LLC's tax return: March 15 for calendar-year LLCs, or the extended date with Form 7004.

Form 5472 is filed alongside a pro forma Form 1120, a placeholder corporate return showing the LLC's basic information. This combination has been required since 2017 when the IRS expanded Form 5472 obligations to cover disregarded entities owned by foreign persons.

The Form 5472 penalty is $25,000 per form, per year, assessed automatically when the IRS determines the form was not filed. There is no warning. The penalty notice arrives after the deadline passes.

What if my LLC has multiple foreign members?

Multi-member LLCs with foreign owners are taxed as partnerships by default and file Form 1065 (US Partnership Return of Income). Each member receives a Schedule K-1 showing their share of income, deductions, and credits. For a foreign partner, the LLC must withhold 37% on that partner's share of effectively connected income (ECI) and remit it quarterly using Form 8804 and Form 8805.

Multi-member LLCs with foreign partners also need Form 1042-S for any US-source income that is not ECI, and Form 1042 annually to report that withholding.

What is effectively connected income (ECI)?

ECI is income from a US trade or business conducted directly or through a US LLC. If your LLC is actively doing business in the US (selling goods, providing services, renting US real estate), that income is ECI and taxed at standard graduated rates. The filing for ECI is Form 1040-NR for individual foreign owners, or Form 1120-F for foreign corporations.

If the LLC has no US business activity, income from US investments (dividends, interest, rent from passively held US real estate) is treated as fixed, determinable, annual, or periodical income (FDAP). FDAP income faces a flat 30% withholding rate unless reduced by a tax treaty between the US and the foreign owner's country.

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Does FIRPTA apply to my LLC?

FIRPTA (Foreign Investment in Real Property Tax Act) applies when a foreign person disposes of a US real property interest. If your LLC holds US real estate and you sell or dissolve the LLC while it holds that property, the buyer or the LLC must withhold 15% of the amount realized and remit it using Form 8288 and Form 8288-A. The foreign owner then files a US tax return and can claim a refund if actual tax liability is lower than the 15% withheld.

What is FBAR and who must file it?

FBAR (FinCEN Form 114) is required when a US entity has a financial interest in or signature authority over foreign bank accounts where the aggregate balance exceeded $10,000 at any point during the calendar year. If your US LLC has foreign bank accounts, the LLC files an FBAR by April 15 (automatically extended to October 15).

Willful FBAR penalties reach the greater of $100,000 or 50% of the account balance per violation. Non-willful penalties are up to $10,000 per violation.

What is Form 8938 and how does it differ from FBAR?

Form 8938 (Statement of Specified Foreign Financial Assets) is filed with your US tax return. Thresholds are higher: $50,000 for single filers, $100,000 for married filing jointly, with higher thresholds for taxpayers living abroad. It covers foreign accounts, foreign stock and securities, foreign partnerships, and foreign trusts. FBAR covers foreign accounts over $10,000; Form 8938 covers specified assets above higher thresholds. You may need to file both, and they require different information.

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How do you get an EIN as a foreign owner?

Foreign individuals without an ITIN or SSN obtain an EIN by submitting Form SS-4 by fax or mail (not online). The IRS fax number for international applicants is +1-267-941-1099. Processing takes 4-6 weeks by mail and 1-2 weeks by fax. Some applicants call the IRS directly at +1-267-941-1000 and receive the EIN on the call, though hold times are long.

The IRS online EIN application requires a US SSN or ITIN. Foreign nationals without either must apply by fax or phone. Third-party EIN services charge $50-$200 for a form the IRS issues for free.

What do you file in the final year when you dissolve the LLC?

When a foreign-owned LLC dissolves, the final-year Form 5472 must be filed with the "final return" box checked on the pro forma Form 1120. For multi-member LLCs, file a final Form 1065 with final K-1s for each member. If the LLC withheld on foreign partner distributions, file final Form 8804 and Form 8805. If the LLC held US real estate being sold or distributed as part of dissolution, FIRPTA withholding may apply. Close the EIN by contacting the IRS directly.

What is the biggest mistake foreign LLC owners make?

The most common error: not filing Form 5472 because the LLC had no income and therefore no perceived filing requirement. Form 5472 is an information return, not an income-based return. Even if the LLC earned zero dollars, if there were any reportable transactions with the foreign owner (a contribution at formation, a distribution, a loan), Form 5472 is required. The IRS has collected millions in automatic penalties from LLCs that earned nothing but missed the filing.

If you are dissolving a foreign-owned LLC, the complete closure service at $599 from Dissolve My LLC includes coordination of final Form 5472 filing, IRS EIN cancellation, and state dissolution, so nothing is left open after the LLC is gone.