A single-member LLC (SMLLC) owned by a non-US person is the most popular structure for foreign entrepreneurs doing business internationally. It's simple, tax-efficient, and accepted everywhere. But there's one IRS filing that trips up new owners constantly — and missing it costs $25,000 per year.
That filing is Form 5472 + pro forma Form 1120. This article explains what it is, why it exists, and how to file it correctly.
The Default: SMLLC as a "Disregarded Entity"
When you form a single-member LLC, the IRS's default treatment is to ignore the LLC for tax purposes. The entity is disregarded, and the owner is taxed as if they owned the business assets directly.
For a US-person owner, this means: report LLC income on Schedule C of your 1040. Simple.
For a non-US person owner, it's more nuanced:
- The LLC isn't a taxpayer
- There's no Form 1040 or 1040-NR obligation unless you personally have US-source income
- But — since 2017 — there IS a mandatory informational filing
That's Form 5472.
Why Form 5472 Exists
Before 2017, foreign-owned SMLLCs were essentially invisible to the IRS. They could conduct extensive business (even just through US banks) with no US tax reporting at all. This created concerns about money laundering and tax transparency.
The Treasury closed this gap with Regulation TD 9796 (effective Jan 1, 2017):
Foreign-owned domestic disregarded entities must file Form 5472 annually to report reportable transactions with their foreign owner.
Since then, every foreign-owned SMLLC must file 5472 — whether the LLC had revenue or not, whether any money moved or not.
What Gets Reported
Form 5472 reports reportable transactions between the LLC and its foreign owner (or other related parties). "Reportable transactions" include:
- Capital contributions from owner to LLC
- Distributions from LLC to owner
- Loans between them
- Payment for services
- Sale or rental of property
- Royalties, interest, commissions paid between them
Even if the LLC had only one transaction all year (e.g., your initial $1,000 capital contribution), Form 5472 is required.
Purely external transactions (LLC receives payment from a client, pays a supplier) are NOT reportable on 5472. Only related-party transactions are.
The "Pro Forma 1120" Wrapper
Here's where it gets unusual: Form 5472 can't be filed standalone. It must be attached to a pro forma Form 1120 — a corporate return that doesn't actually report corporate income.
The 1120 is "pro forma" meaning:
- Most fields are left blank
- Write "Foreign-owned U.S. DE" at the top
- Only identify the entity (name, address, EIN)
- Attach the 5472 as a statement
The 1120 here is a vehicle to deliver 5472 to the IRS. The LLC isn't actually a corporation — this is just the IRS's chosen format.
How and When to File
Deadline
April 15 of the year following the tax year. For 2025 activity, that's April 15, 2026.
Extension via Form 7004 available (automatic 6 months → October 15, 2026).
How to File
Form 5472 + pro forma 1120 cannot be e-filed if the entity is a foreign-owned SMLLC. You must:
- Paper mail to: Internal Revenue Service, 1973 Rulon White Blvd., Ogden, UT 84201
- Or fax to: 855-887-7737
Both methods work. Mail with tracking (USPS Priority with signature) is the most common.
EIN Required
You cannot file without an EIN. If your LLC doesn't have one, apply immediately using Form SS-4 (by mail or fax — non-residents generally can't apply online).
EIN application takes 4-8 weeks by mail. Plan ahead.
The $25,000 Penalty
Penalty structure under Section 6038A:
- $25,000 per form, per year for failure to file
- Plus $25,000 per month continuing failure after IRS notice
- Plus interest
Example: a single missed year detected during a future audit = $25,000. Three missed years = $75,000. This isn't a hypothetical — the IRS actively pursues non-compliant SMLLCs.
Good news: first-time abatement is available for many clean filers who missed just one year.
Common Scenarios
Scenario 1 — Dormant LLC, No Transactions
Your LLC was formed but never operated. Bank account open, zero transactions.
- Still need 5472? If there were no reportable transactions, technically no
- Still need pro forma 1120? The IRS's position varies; safest to file a blank 5472 just to show the entity is known
- Recommended: file anyway, costs nothing
Scenario 2 — Active LLC, Only Client Transactions
Your LLC earned $200k from international clients, paid $50k in non-related-party expenses, distributed $150k to yourself (the owner).
- The $150k distribution is a reportable transaction with the foreign owner → goes on 5472
- Client revenue and non-related expenses do NOT go on 5472
- File 5472 + pro forma 1120 by April 15
Scenario 3 — LLC Receiving Capital from Owner
You contributed $5,000 to open the LLC's bank account.
- That $5,000 contribution is reportable
- File 5472 + pro forma 1120
Scenario 4 — LLC Paying Owner for Services
You invoice your own LLC €60k for "management services" to get money out.
- That $60k payment to the foreign owner is reportable
- Also a reminder: this type of structure may trigger substance questions — be careful about characterization
The Rest of the Filing Landscape
Form 5472 is typically the only IRS filing a foreign-owned SMLLC needs, assuming:
- No US-source income (no US clients, no US physical presence)
- No employees
- No US real estate owned
- No elected corporate status
If any of these change, additional forms kick in:
- US employees → Form 941 (quarterly payroll), W-2, 940
- Real estate → Form 1040-NR, FIRPTA withholding
- Corporate election → Form 1120 (full return, actual tax due)
- US clients generating ECI → Form 1040-NR for the foreign owner
State-level filings (annual report, franchise tax) also apply separately.
Common Mistakes
1. Missing the First Year
Most SMLLC owners hear about 5472 for the first time after forming. If your LLC was formed in 2025 and had any owner transaction, the 2025 5472 is due April 15, 2026.
2. Filing 5472 Without Pro Forma 1120
The 5472 must be attached to a pro forma 1120. Filing 5472 alone = invalid filing = $25k penalty.
3. E-Filing Attempt
5472 cannot be e-filed via standard 1120 e-file systems for a disregarded entity. Paper or fax only.
4. No EIN
An LLC without an EIN can't file 5472. Get the EIN before year-end; 4-8 weeks by mail.
5. Wrong Owner Address
The foreign owner's non-US address must match their actual residence. Using a mail forwarding address that looks US-based is a red flag.
Next Steps
Form 5472 is boring, one-page, and costs you nothing to file correctly. Missing it costs $25,000 minimum. The math is obvious.
At Leasum, annual 5472 + pro forma 1120 filings are part of our standard compliance package for US LLC clients — alongside EIN maintenance, state annual reports, and bookkeeping. If you're a non-resident with an SMLLC and you're not 100% sure your 5472 history is clean, it's worth an hour's review with us before the IRS notices.
