Which LLCs Must File a Form 5472?

Form 5472

In the United States, most LLCs with at least 25% foreign shareholders are required to file a Form 5472 every year. It is used to inform the IRS of all monetary transactions between the reporting business and a foreign party.

Which foreign-owned LLCs need to file a Form 5472?

All single-member LLCs that are owned by non-U.S. residents or foreign companies are required to file a Form 5472. It applies to single-member LLCs that are disregarded for tax purposes, as well as those which are taxed as a Corporation.

For multi-member LLCs, the Form 5472 filing requirement is determined by the particular LLCs tax structure. The majority of multi-member LLCs, whether domestic or foreign-owned, are taxed as a Partnership, the default IRS tax classification for multi-member LLCs. However, a multi-member LLC may elect to be taxed as an S-Corp. If it selects the latter, and the LLC has 25% or more foreign ownership, then a Form 5472 will have to be filed. Were the LLC taxed as a partnership, however, it would not be required to complete a Form 5472.

What happens if a foreign owner has a green card?

An individual with a green card is considered a U.S. tax resident for tax purposes. As a result, if a green card holder owns 25% or more of an LLC, the LLC would not have to file a Form 5472, since the individual is not considered a foreigner under IRS guidelines. The determining factor is the tax residency of any individual owning at least one quarter of the LLC. As a result, if a green card holder with a 25% stake in an LLC were to reside in a foreign country, the individual would still be considered a US resident for tax purposes, and there would be no Form 5472 filing requirement. 

What is the withholding rate for LLCs with foreign owners?

Under current US tax laws, all foreign persons are subject to a 30% tax on the gross amount of their U.S.-source income. U.S.-source income includes, but is not limited to: dividends, interest, and royalty payments. While the 30% withholding is a fixed rate, the United States has entered into income tax treaties with various countries to avoid individuals being subject to double taxation. If a foreign individual is a citizen of a tax treaty country, the withholding amount will be adjusted in accordance with the terms of the treaty. 

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*Disclaimer: this blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns. Contacting us through our website does not establish an attorney-client relationship.*

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Eric Gros-Dubois

Founding partner Eric Gros-Dubois established EPGD Business Law in 2013. With over a decade of experience expanding the firm and leading it to its current success, Eric now primarily manages the corporate division of EPGD. Given Eric’s educational background, holding both a JD and MBA, combined with his own unique experience of starting a business from scratch and growing it to a multi-million dollar firm, he brings a specialized and invaluable perspective to those seeking legal assistance for themselves and their businesses. Having now instilled his same values in our team of skilled corporate associates, Eric leads a firm that is always ready, willing, and equipped to handle any and every legal matter that a business owner may have.

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*The following comments are not intended to be treated as legal advice. The answer to your question is limited to the basic facts presented. Additional details may heavily alter our assessment and change the answer provided. For a more thorough review of your question please contact our office for a consultation.

One Response

  1. I do not completely understand the write up. It says that if a multimember LLC(MMLLC) is taxed as a partnership then they will not be required to file Form 5472.
    For eg : there is a MMLLC with entire foreign ownership, and they have reportable transaction. Then it is required to report such transactions and file 5472.
    If i am missing something here, please guide.

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