For income tax purposes, the IRS treats a U.S. LLC with only one member as an entity disregarded as separate from its owner, i.e., disregarded entity (DE), unless it files Form 8832 and affirmatively elects to be treated as a corporation.
A "disregarded entity" is a business structure that is separate from its owner for legal purposes, but ignored (or "disregarded") for U.S. federal income tax purposes.
For legal purposes: The entity exists as a separate legal person. For example, a single-member LLC can sign contracts, own property, and offer liability protection to its owner.
For tax purposes: The IRS ignores the entity as separate from its owner. The income, expenses, and tax obligations "pass through" to the owner's individual tax return.
When the owner of a U.S. single-member LLC treated as a disregarded entity is a foreign person (nonresident alien or NRA, e.g., never visited the U.S., no U.S. visa or green card), the IRS does not allow reporting the LLC’s activity on Schedule C as if the owner were self-employed. Instead, the LLC as a foreign-owned U.S. disregarded entity (FOUSDE) must file:
Form 5472 (Information Return of a 25% Foreign-Owned U.S. Corporation or Foreign Corporation engaged in a U.S. trade or business), and
Pro forma Form 1120 (U.S. Corporate Income Tax Return) submitted only to accompany Form 5472.
This filing is mandatory, even if the LLC has:
No U.S.-source income,
No worldwide income,
No activity during the year, or
The foreign owner of the U.S. LLC files an individual tax return: Form 1040 or 1040-NR.
Failure to comply may result in steep penalties of $25,000 per tax year, per entity. Even minor missteps, such as filing without an EIN or mailing to the wrong IRS address, can lead to rejection and penalties.
The tax and reporting obligations for such entities can be unexpectedly complex. We at TFX are ready to help! For details, see our guide How to file taxes for an LLC with no income: A comprehensive guide.
Additional considerations
Entity classification option: Electing to treat the LLC as a corporation does not remove the Form 5472 requirement — it just shifts filing to accompany a regular corporate Form 1120.
FBAR reporting: If the LLC holds foreign financial accounts, these must also be reported on FBAR.
Foreign-earner income: If the property held in the LLC is used for rental activity, then the natural owner (foreign person) will report rental income on Form 1040-NR under their personal ITIN. That doesn’t replace the obligation to file Form 5472 + pro forma 1120 under the LLC’s EIN.
Dissolution or liquidation of FOUSDE: The owner of FOUSDE is not required to file Form 966, Corporate Dissolution or Liquidation, when dissolving it.
Real-life examples
If you are a foreign owner of a U.S. disregarded entity or a non-resident alien (not a U.S. citizen and not a green card holder) who owns or plans to purchase a U.S. property through a U.S. LLC, you are required to file informational returns: Form 5472 with a pro forma Form 1120.
Please note that the LLC purchase will be identified by the IRS. U.S. title insurance companies are required to identify the natural persons behind shell companies used to make cash purchases of high-end residential estates in selected metropolitan areas. Partially cash transactions (Covered Transactions) are reported by the Title Insurance Company by filing Form 8300 to FinCEN.
Example 1. UK skier owns a condo in Utah
John Smith, a UK citizen, owns a ski lodge in Utah registered to a Delaware LLC. John’s house is not used for rental purposes. John spends 3 weeks each winter in Utah skiing. John must file Form 5472 to "disclose the natural owner" of this property held by the Delaware LLC, along with Form 1120.
The existing LLC already had an Employer Identification Number (EIN) — a unique nine-digit number assigned by the IRS to business entities operating in the United States for the purposes of identification. Therefore:
John can timely file Forms 5472 and 1120 by the due date (including extensions).
John is not required to file a personal U.S. tax return (Form 1040-NR).
Example 2. Real estate investor from India with Miami property
Samit Paap, an Indian citizen, wants to invest $1M in a condo in Miami. He prefers not to purchase the property outright to avoid disclosure of his identity in the property ownership. On recommendation from financial advisors, Samit decided to purchase the condo through an LLC. However, starting from the 2017 tax year, Samit is subject to filing requirements to disclose the identity of the “natural person” in this transaction — himself.
This raises the question, whether it is even worthwhile to purchase via the LLC, rather than purchasing outright, as the information disclosed on Form 5472 would defeat the purpose of buying the real property through a disregarded entity. The answer will depend on the purpose of the LLC:
If the LLC was established for asset protection — it is a worthwhile venture.
If the sole purpose of purchase through a U.S. LLC is to disguise the "foreign natural owner" of the property — then it is no longer a worthwhile venture.
TFX can assist with FOUSDE tax reporting requirements
If you have a single-member LLC based in the U.S. and treated as a disregarded entity, TFX can prepare a tax return for you. When you begin filling out a tax questionnaire, you may wonder whether to choose "Individual tax return preparation" or "Tax preparation for a business":
If you're a U.S. person, answer Yes to "I am looking for individual tax return preparation" and “I am self-employed or an independent contractor” in your tax questionnaire. You will need to report your LLC's income and expenses on Schedule C of your Form 1040 (the individual income tax return).
If you're not a U.S. person (non-resident — NRA), answer Yes to the question "I am looking for tax preparation for a business or entity" in your tax questionnaire. This is because the IRS treats foreign-owned U.S. disregarded entities (FOUSDEs) differently from U.S.-owned ones (USDEs).
If you also need to file Form 1040-NR (the nonresident individual income tax return) — for example, if your LLC is engaged in a U.S. trade or business — then also answer Yes to “I am looking for individual tax return preparation” and No to “I am self-employed or an independent contractor”.
Tax filing obligations for a foreign-owned U.S. disregarded entity (FOUSDE)
EIN requirement:
Prior to filing Form 5472, the LLC must obtain an Employer Identification Number (EIN) by filing Form SS-4. Submit it via fax or mail, or apply online through the IRS website.
Box 10 should explain that it is for filing Form 5472. Write “Foreign-owned U.S. disregarded entity — Form 5472”
Pro forma 1120 with Form 5472 attached:
Required even if there is no U.S. trade or business or U.S.-source income.
Form 5472 — to report transactions between the U.S. LLC and its foreign owner (e.g., capital contributions, payments).
Pro forma Form 1120 — just the first page, with "Foreign-owned US disregarded entity" written at the top.
Deadline: April 15.
Extension: File Form 7004 before April 15 to request a 6-month extension to file Form 5472 + 1120. Request a non-personal extension in your TFX account. It must be mailed and cannot be electronically filed (although a fax option is available - not as reliable as mail with delivery confirmation).
How to file Form 7004 and Form 5472 + 1120:
“Foreign-owned US disregarded entity” should be written across the top of the Form 7004 and Form 1120.
❗ Form 7004 and Form 5472 + 1120 cannot be e-filed. Both must be faxed or mailed to a specific IRS department that handles foreign-owned disregarded entities (FOUSDEs):
☎ Fax (300 DPI or higher) to 855-887-7737.
✉ Mail to:
Internal Revenue Service
1973 Rulon White Blvd
M/S 6112 Attn: PIN Unit
Ogden, UT 84201
Note: Filing Form 5472 + 1120 without an EIN or mailing it to the wrong address can result in rejection or penalties.
Tax filing obligations for a foreign owner of a FOUSDE
ITIN requirement:
In order to request an EIN, the foreign owner must first obtain or renew an Individual Taxpayer Identification Number (ITIN) by filing Form W-7. You can mail it with your tax return and all required original identification documentation.
⚠ Note: One million ITINs expire each December 31. Make sure you renew yours on time. Refer to How to renew an expired ITIN. Although a Form W-7 is usually attached to the tax return, a taxpayer is not required to attach a federal tax return to their ITIN renewal application. Taxpayers have the option to call and make an appointment at a designated IRS Taxpayer Assistance Center instead of mailing original identification documents to the IRS. When making an appointment, be sure to indicate that this involves an ITIN renewal application.
The foreign owner must file if the LLC is engaged in a U.S. trade or business or has effectively connected income (ECI). Refer to the IRS website for more information on 1040-NR filing requirements.
If the LLC only holds passive assets or has no U.S. activity, the owner might not need to file Form 1040-NR, but filing Form 5472 is still mandatory.
Withholding obligations (if applicable):
If the LLC makes distributions to its NRA owner or pays U.S.-source income to other foreign persons, it may need to:
Withhold 30% tax (or lower treaty rate).
File Form 1042 and 1042-S to report payments to foreign persons.
Deadline: April 15 or June 15.
Extension: File Form 4686 to request a 6-month extension to file your personal nonresident tax return.
How to file Form 4686 and Form 1040-NR:
Form 1040-NR: E-filing is allowed if you have an ITIN or SSN. If you don't have an ITIN yet and are ineligible for an SSN, apply for an ITIN as soon as possible.
Form 4686:
If you have an ITIN or SSN, request a personal extension in your TFX account.
❗ If you don't have an ITIN yet and are ineligible for an SSN, unfortunately, you cannot request an extension via a TFX account without an SSN/ITIN. Instead, download Form 4686 from the IRS website, enter "ITIN TO BE REQUESTED" wherever an SSN is requested, and mail Form 4868 to:
Department of the Treasury
Internal Revenue Service Center
Ogden
UT 84201-0045
USA
TFX pricing information
Form | Name | Price |
Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, for foreign-owned U.S. disregarded entities | $600 | |
U.S. Corporation Income Tax Return, first page of Form 1120 to be filed with Form 5472 | $150 | |
Application for Individual Taxpayer Identification Number (ITIN) | $200 | |
Application for Employer Identification Number (EIN) | $150 | |
Non-resident return includes one U.S tax form (W-2, 1099 of any kind, 1042-S, etc.) | $525 | |
| Each additional U.S. tax form | $50 |
Schedule C (Form 1040) | Self-employment income | One is included in the $75 Expanded Income Bundle, each additional costs $150 |