US LLC Taxes for Non-Residents: What You Actually Owe

Here is the part that surprises most people: a foreign-owned single-member LLC can owe zero US federal income tax and still face a $25,000 penalty for failing to file. The filing is Form 5472, attached to a pro forma Form 1120, and it is required even in a year with no profit and no US customers. Tax liability and filing obligation are two separate questions, and mixing them up is the single most expensive mistake non-resident LLC owners make.

Bottom line

• A single-member LLC owned by a non-US person is a disregarded entity, and it must file Form 5472 with a pro forma Form 1120 every year.
• The penalty for missing it is $25,000, plus $25,000 for each 30-day period once the IRS has notified you and 90 days have passed.
• Owing no US income tax is common. Having no filing obligation is not.

Why your LLC is “disregarded” and why that still means paperwork

By default, a single-member LLC is a disregarded entity for US federal income tax purposes. It files no income tax return of its own; its activity flows to the owner. When that owner is a non-resident individual with no US-connected income, there may genuinely be no US income tax to pay.

But the IRS still wants visibility into money moving between a US entity and its foreign owner. That is what Form 5472 does. Since the rules were extended to foreign-owned disregarded entities, these LLCs have had a standalone information-reporting duty that has nothing to do with whether they made a profit.

Form 5472 and the pro forma 1120, step by step

The mechanics are unusual, so get them right.

What you file. A Form 1120 used only as a cover sheet — the IRS instructions say to complete just the name and address of the foreign-owned US disregarded entity plus items B and E on the first page. Write “Foreign-owned U.S. DE” across the top. Form 5472 is attached to it.

How you file. Not electronically. The IRS is explicit: a foreign-owned US disregarded entity cannot file Form 5472 electronically. You fax it to 855-887-7737 (at 300 DPI or higher) or mail it to the IRS PIN Unit in Ogden, Utah. Keep the fax confirmation.

When you file. By the due date of the pro forma Form 1120, including extensions. For a calendar-year entity that is mid-April, extendable with Form 7004. Verify the current year’s date on irs.gov before you rely on it.

What counts as a reportable transaction. This trips people up badly. Part V of the instructions covers amounts paid or received in connection with the formation, dissolution, acquisition and disposition of the entity, including contributions to and distributions from the entity. So if you wired $2,000 into your own LLC to cover the registered agent and the state fee, that is a reportable transaction. A “dormant” LLC that was funded at all has something to report.

When there is genuinely no US tax

The usual fact pattern for a non-resident with no US federal income tax liability looks like this: you are a non-resident alien, you live and work outside the United States, all services are performed outside the US, you have no US office or fixed place of business, and you have no dependent agent acting for you in the US. Your customers may well be American; that alone does not create US tax.

What you are testing is whether you are engaged in a US trade or business, and whether you have effectively connected income. The IRS position is straightforward on one point: if you perform personal services in the United States at any time during the tax year, you are usually treated as engaged in a US trade or business. For foreign-source income to be treated as effectively connected, you generally need a US office or other fixed place of business that is a material factor in producing that income.

So the things that change the answer are physical and structural: working from inside the US, renting US office space, hiring a US employee, or having someone in the US with authority to conclude contracts on your behalf. Selling software to Americans from a desk in Osaka or Bengaluru generally does not.

Two caveats worth naming. First, US-source passive income — certain dividends, interest, royalties — can be subject to 30% withholding at source regardless of any trade or business analysis, sometimes reduced by treaty. Second, state and sales tax follow their own rules entirely: economic nexus for sales tax can exist where there is no income tax exposure at all.

ECI basics without the jargon

Effectively connected income is the bridge between “I have a US company” and “I owe US income tax.” If you have ECI, you file a Form 1040-NR and pay US tax on the net amount at the same graduated rates as US residents — which also means you need an ITIN, a separate application process from the EIN.

Practical markers that push toward ECI:

• You spend working days in the US on the business.
• You have a US-based employee or a contractor who negotiates and signs for you.
• You lease US office, warehouse or studio space that materially produces the income.
• You hold US inventory and fulfill from it yourself rather than through an independent third party.

Markers that generally do not, on their own: a registered agent, a mail-forwarding address, a US bank account, US customers, a .com domain, or a US cloud server.

This is the boundary where guessing gets expensive. If you sit near any of those first four markers, get a US tax professional to look at your facts. 1-800Accountant handles this category of small-business filing and is a reasonable place to start if you want a US-based preparer rather than a marketplace.

State annual reports and the rest of the calendar

Federal filing is only half of it. Your state has its own clock, and it does not care that you owe no income tax.

• Wyoming charges an annual report license tax with a $60 minimum for LLCs with $300,000 or less in Wyoming assets, due in your anniversary month of formation.
• Delaware charges a flat $300 annual franchise tax for LLCs, due June 1, with no annual report and no share calculation. Miss it and there is a $200 penalty plus interest.
• New Mexico requires no annual report for LLCs at all, which is a real part of its appeal. See wyoming-vs-new-mexico-llc for the full trade-off.

Registered agent renewal is separate again, and losing your agent can lead to the state dissolving the entity. What is a registered agent covers why that role is not optional.

On beneficial ownership reporting: FinCEN’s rules have changed more than once, and entities formed in the United States are currently exempt from filing beneficial ownership information, with the requirement now aimed at foreign-formed companies registered to do business in a US state. Because this area has moved repeatedly, check fincen.gov/boi rather than any article, including this one.

Why to hire a preparer

We normally argue for doing simple things yourself. This is not one of them, for three concrete reasons.

The downside is asymmetric. A preparer might cost a few hundred dollars. A missed Form 5472 is $25,000, and the continuation penalty stacks in $25,000 increments per 30-day period once the IRS has sent notice and 90 days have run. There is no version of this math where saving the fee is rational.

The filing cannot be e-filed. No consumer tax software walks you through faxing a pro forma 1120 to the PIN Unit in Ogden. You are assembling an unusual package by hand.

The judgment calls are not documentation calls. Whether a contractor is a dependent agent, whether your US trip created a trade or business, whether a treaty article helps — those are facts-and-law questions, and getting them wrong is invisible until an examination.

If you want the filing bundled with the entity itself, doola includes bookkeeping and compliance tiers aimed at exactly this reader, and doola-vs-firstbase compares that against the leaner alternative.

FAQ

My LLC had no income at all. Do I still file Form 5472?

Almost certainly yes. Contributions to and distributions from the entity are reportable transactions, so funding the LLC to pay the state fee is enough to trigger the filing. Treat “dormant” as a bookkeeping description, not a filing exemption.

Does a multi-member LLC file Form 5472 too?

Different regime. A multi-member LLC is a partnership by default and generally files Form 1065 with Schedules K-1 and K-3, plus withholding obligations on foreign partners’ ECI. Form 5472 is the disregarded-entity and corporate rule.

Can I get the $25,000 penalty removed?

Sometimes, through reasonable-cause relief, but it is a request and not a right, and “I did not know” is a weak argument. Filing late voluntarily is considerably better than being found.

Do I need an ITIN?

Only if you personally have a US filing obligation, typically because you have effectively connected income and must file a 1040-NR. The EIN belongs to the LLC and does not cover you personally.

This is general information, not tax or legal advice. Your facts decide the answer, so confirm your position with a CPA or attorney before you file.

If you want a US preparer on the federal filings, start with 1-800Accountant. If you would rather have formation, bookkeeping and the annual filings in one subscription, doola is the option built for non-US founders — and either way, calendar the 5472 deadline the day your LLC is approved.