The filing requirements and practical application of a US LLC for foreign owners may force many foreign nationals to reconsider their options. As of January 1, 2017, Limited Liability Companies (LLCs) formed in the United States, which are treated as disregarded entities and wholly-owned by foreign persons, are subject to new IRS reporting requirements.
Such foreign-owned US LLCs must file IRS Form 5472 if there are transactions between the direct OR indirect owners of the US LLC and the LLC itself. The IRS is asking for the tax resident status of the direct and indirect owners of US LLCs including information on the amount of cash or assets transferred to or from them. Form 5472 is not an income tax return, it is merely an information return which must be filed annually, but failure to file this form can result in a $25,000 penalty.
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