US businesses have multiple filing requirements depending on the structure of the business. In this article we’ll cover the filing requirement for a US LLC owned 100% by a non-US individual.

This is meant to be a high level summary only and may not cover all additional required forms that may apply based on different factors, such as size, type of business, your tax filing status, the country where you reside, and US tax treaties, in order to fully meet your IRS obligations.

A U.S. single-member LLC is treated as a disregarded entity for U.S. tax purposes unless an election is made by the business to be treated as a corporation. As a disregarded entity, all of the income, deductions, and tax liabilities flow directly up to the owner.

For reporting purposes only, the IRS treats all foreign-owned single-member LLCs that are considered disregarded entities as if they are C corporations. This would mean that even if no U.S. activities or income was actually generated by the business, at a minimum, you would be required to comply with the following requirements:

1. An Employer Identification Number (EIN)

2. On an annual basis, you’ll need to file a Form 1120 and a Form 5472 for informational purposes to the IRS. No tax payments should be required with these forms.

The Form 1120 is the tax form generally used by U.S. C corporations. For foreign-owned single-member LLCs, the IRS only requires you to complete the name and address of the foreign-owned LLC and items B and E on the first page in the Form 1120.

The Form 5472 is the form the IRS requires for purposes of reporting transactions that occur with a foreign or domestic “related party.” Per the IRS, a related party includes:

If the foreign-owned U.S. LLC has reportable transactions with anyone who falls into one of these categories, you’ll need a separate Form 5472 for each one. Failure to file or incorrect filling for a Form 5472 will incur a minimum penalty of $25,000.

3. Maintain financial records that support the information on Form 5472. This requirement is met with the books maintained by Finaloop.

When a non-U.S. individual owns a U.S. LLC, and the activities of the business take place outside of the U.S., the first step is to determine whether the income of your business is subject to tax in the U.S.

As a non-US person, you are subject to tax in the US if you are engaged in a trade or business in the U.S., i.e., when you perform services or sell products in the United States.

If you reside in a treaty country, you may be able to apply the treaty rules of permanent establishment instead of the U.S. tax rules of being engaged in a trade or business. This is something you should check directly with a tax professional.

If you are considered to be engaged in a U.S. trade or business, you’ll need to determine whether you have income effectively connected to that U.S. business, also known as Effectively Connected Income (ECI).

As a non-U.S. person, you need to both be engaged in a U.S. trade or business AND have ECI to be subject to tax in the U.S.

If both these conditions exist, you need to report your income to the IRS by filing a Form 1040NR (Nonresident Alien Income Tax Return) and get an ITIN (Individual Taxpayer Identification Number).