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A complete reference guide for non-resident owners of US LLCs and corporations. Covers what triggers US tax obligations, how income is classified, what reporting exists independently of tax liability, and what 2026 has changed.
A US company is considered "foreign-owned" when a non-US person holds 25% or more of its ownership interest. This is not limited to sole owners. A minority foreign stakeholder holding exactly 25% can trigger the same reporting obligations as a 100% foreign owner - for the entire company. Most guides focus on the sole-owner scenario. The 25% threshold is where many co-owned structures get caught off guard.
Ownership does not require physical presence. It is determined by legal control and equity interest, not geography. A founder based anywhere outside the US who holds 25% or more of a US-registered entity is a foreign owner under IRS rules from the moment that company is formed.
Three things determine your obligations: where your income originates, how that income is classified, and whether your business activity creates a taxable connection to the US. Everything else - filing requirements, withholding rules, reporting forms - flows from those three questions.
Whether revenue comes from US customers, US-based clients, or services performed inside the US determines whether it is treated as US-source income by the IRS.
The IRS splits foreign-owned company income into ECI and FDAP categories. Which one applies determines your tax rate, withholding obligation, and which forms must be filed.
Business activity - not just physical presence - can create a taxable connection to the US. Agents, contractors, and payment processors all factor into this assessment.
A minority foreign stakeholder holding exactly 25% triggers the same reporting obligations as a 100% foreign owner - for the entire company, not just their share. This is the single most commonly missed trigger in co-owned US entities with multiple foreign stakeholders.
US tax obligations are triggered by specific conditions, not by residency alone. The IRS is not asking where you live. It is asking whether this company has income or activity connected to the United States. The primary triggers are:
Revenue from US customers, US-based clients, or services performed inside the US.
Primary TriggerIncome from actively conducting a trade or business in the US. Triggers a filing obligation regardless of whether any tax is ultimately owed.
Active BusinessPassive income such as dividends, interest, or royalties sourced from the US. Generally subject to a flat 30% withholding tax unless a treaty reduces that rate.
Passive IncomeFinancial activity between the foreign owner and the US company, even if no external revenue exists. Capital contributions, loans, and expense reimbursements all qualify.
Internal ActivityPayments received via Stripe, PayPal, or similar US-based platforms connected to a US LLC and EIN. The processor files this data with the IRS independently, without your involvement.
IRS Paper TrailA company with zero external revenue can still have reportable transactions. A capital contribution from the foreign owner to the LLC, a loan, an expense reimbursement - each qualifies as reportable activity under IRS rules, regardless of whether the business made a single dollar from a customer.
The IRS divides income earned by foreign-owned US companies into two categories. Which one applies determines the tax rate, the withholding obligation, and what filing is required.
ECI
ECI is income from actively running a business in the United States. If your US LLC performs services for US clients, operates a US-based storefront, or has workers functioning inside the US, that income is likely ECI. It gets taxed at standard graduated US rates - the same rates that apply to domestic businesses.
FDAP
FDAP covers passive income with a US source - interest payments, royalties, dividends, certain rents. It is generally subject to a flat 30% withholding tax unless a treaty between the US and your home country brings that rate down.
ECI is active business income. FDAP is passive or investment income. Most remote service providers and software sellers hit ECI classification first. If you are selling software or providing services through your US LLC to US customers, ECI is the category that likely applies - and ECI means a filing obligation exists whether or not you owe a dollar.
Foreign-owned US LLCs carry reporting obligations that exist entirely separately from income tax liability. These are compliance requirements - not optional disclosures, and not waived by having no taxable income.
The core annual reporting requirement for foreign-owned single-member LLCs
A foreign-owned single-member LLC treated as a disregarded entity is required to file Form 5472 attached to a pro forma Form 1120. The pro forma 1120 is not a real corporate tax return - it is a shell filing created solely to attach the 5472.
This trips up a significant portion of foreign owners who try to handle compliance without professional help. The form itself is not complicated; understanding why a "disregarded" LLC is filing what looks like a corporate return is where the confusion usually starts.
Any reportable transaction between the LLC and its foreign owner. The penalty for a missing or incomplete filing is $25,000 per form, per year - not per company, not per mistake.
Due on the same schedule as the corporate tax return - generally April 15, with extensions available to extend the filing deadline.
The penalty for a missing or incomplete Form 5472 filing applies to each filing year in which the requirement was not met. It is assessed independently of whether any tax liability existed - zero income does not eliminate this exposure.
Any financial exchange between the LLC and a related foreign party qualifies. Third-party revenue is not required. The transaction only needs to exist between the owner and the company.
Form 5472 and the pro forma Form 1120 are due on the same schedule as the corporate tax return - generally April 15, with extensions available. These forms are due annually for every year in which any reportable transaction occurred between the LLC and its foreign owner.
"Disregarded entity" is probably the most misunderstood term in US tax law for foreign owners. The name implies invisibility. The reality is the opposite.
For a US resident owner, disregarded entity treatment is genuinely simple.
For a foreign owner, the same treatment creates a more complex filing situation, not a simpler one.
The result is a foreign-owned single-member LLC filing a pro forma corporate return (1120) just to attach an informational form (5472) - all for an entity the tax code officially calls "disregarded." That structure catches most DIY filers completely off guard. The word "disregarded" creates a false sense of simplicity that does not survive contact with the actual filing requirements.
The word "disregarded" creates a false sense of simplicity that does not survive contact with the actual filing requirements. For foreign owners, disregarded entity status means more filing infrastructure, not less - not fewer obligations.
Permanent establishment (PE) is how a foreign-owned company acquires US tax liability without a registered US address, office, or anyone on the payroll inside the country.
Most non-resident owners assume remote operation eliminates US tax exposure. That assumption holds - until it doesn't. PE rules define a taxable US presence based on activity and relationships, not office leases.
A US-based agent who habitually concludes contracts on behalf of the company
A fixed place of business in the US - including a co-working space used on a recurring basis
US-based workers performing core business functions under the company's direction
A US-based dependent contractor whose work is integral to the business
This is where modern remote businesses frequently create PE exposure without realizing it. A US-based virtual assistant who handles customer communications, manages sales inquiries, and coordinates deliverables is not just an admin resource - in certain configurations, that VA is functioning as a dependent agent. If they habitually negotiate or conclude contracts on behalf of the company, PE may already exist. The business has no US office. The founder has never visited the US for business. And yet a taxable US presence has been established through a remote hire.
A software developer based outside the US operates through a US LLC and collects payments via Stripe. He has a US-based VA managing client onboarding and closing service agreements on his behalf. Whether or not he has ever set foot in the United States, his LLC may have triggered permanent establishment - and with it, ECI classification on all income connected to those contracts.
| Scenario | PE Risk Level |
|---|---|
| All work performed outside the US, no US agents or contractors | Low |
| US-based contractor handles sales or concludes client contracts | High |
| Founder travels to the US regularly to conduct business meetings | Moderate to High |
| US co-working space used on a recurring basis | Moderate |
| Software sold to US customers, all servers and staff outside US | Low to Moderate |
| US-based virtual assistant manages operations and client onboarding independently | High |
| US-based VA handles admin only, no contract authority | Low to Moderate |
Once PE is established, ECI rules apply - and the company may owe US tax on income it assumed was entirely foreign. PE risk is not a theoretical concern for large multinationals. It is a practical exposure for any foreign-owned LLC using US-based contractors in operational roles.
US tax obligations for foreign-owned companies are difficult because the triggers are easy to miss, the terminology is misleading, and the penalties compound over time. A professional review gives you a clear picture before gaps become penalties.
Starting in 2025 and with significantly increased enforcement through 2026, FinCEN requires most US companies - including foreign-owned LLCs - to file a Beneficial Ownership Information Report (BOIR) under the Corporate Transparency Act.
Disclosure of every individual who owns 25% or more of the company.
Disclosure of individuals who exercise substantial control over the company.
Submission of government-issued ID documentation for each beneficial owner.
A FinCEN ID may be obtained by beneficial owners as an alternative to submitting ID documents repeatedly across multiple filings.
Filing through FinCEN's secure online portal - not through the IRS.
Most LLCs and corporations registered in the US are required to file unless they qualify for a specific exemption. The primary exemption covers large operating companies with more than 20 full-time US employees and over $5 million in US gross receipts. Most foreign-owned single-member LLCs don't come anywhere close to that threshold and are required to file.
| Company Formation Date | BOIR Filing Deadline |
|---|---|
| Formed before January 1, 2025 | January 1, 2026 (deadline has passed - file immediately if not done) |
| Formed in 2025 | Within 90 days of formation |
| Formed in 2026 or later | Within 30 days of formation |
| Any change in beneficial ownership | Within 30 days of the change |
BOIR is a separate obligation from IRS tax reporting. Missing it does not affect your tax return - but it creates a distinct legal exposure with its own penalty structure that operates entirely independently of any IRS compliance gaps.
This is the section most foreign-owned LLC operators don't know they need to read. If your LLC has a Stripe or PayPal account connected to a US EIN, the IRS may already have a transaction record for your company. The payment processor files that data independently - without your involvement, without your consent, and without waiting to see whether you file a return.
US-based payment processors are required under IRS rules to issue Form 1099-K to accounts that meet reporting thresholds. This filing happens on the processor's schedule, not yours.
When your LLC's Stripe or PayPal account crosses the threshold in a calendar year, the processor files a 1099-K with the IRS using your LLC's EIN - without waiting for your involvement or consent.
The IRS receives the data before you file anything - not after. It happens regardless of where you live or whether you have filed any US tax returns.
The IRS reporting threshold for Form 1099-K is $2,500 for 2026. It is expected to drop to $600 in subsequent years. At $600, nearly every active US LLC with a payment processor account will have a 1099-K on file with the IRS annually.
The IRS now has your revenue data from the processor. If no corresponding tax return or Form 5472 is on file, that discrepancy creates a flagged record. It doesn't trigger an immediate audit, but it builds a paper trail that compounds over time.
A foreign-owned LLC with three years of 1099-Ks and no corresponding filings is carrying significant unresolved exposure. Running a service business or selling software through a US LLC using Stripe is one of the most common ways foreign owners discover compliance gaps - after the paper trail already exists. The IRS is not waiting for you to make a mistake. In many cases, it already has the data.
The IRS is not waiting for you to make a mistake. In many cases, it already has the data. The question is not whether a record exists under your EIN - it is whether your filings match what the processor has already reported.
Use the criteria below to get a sense of your exposure before engaging a professional.
| Situation | Likely Obligation |
|---|---|
| Foreign-owned LLC with US customers, active services | ECI filing required; PE risk assessment needed |
| Foreign-owned LLC, no revenue, owner contributed capital | Form 5472 reporting likely required |
| Payments received via Stripe or PayPal above $2,500 threshold | 1099-K likely already filed with IRS under your EIN |
| US-based agent, VA, or contractor handling contracts or operations | PE risk - professional review recommended immediately |
| Foreign-owned LLC with passive US-source income | FDAP withholding rules apply |
| LLC formed in 2025 or later, no BOIR filed | Immediate FinCEN compliance required |
| LLC formed before 2025, no BOIR filed | Deadline passed - penalties accumulating daily |
| Operating entirely outside the US, no US clients or agents | Low risk, but annual filing assessment still recommended |
Does my LLC have any financial transactions - even internal ones - between me and the company?
Do I use a US payment processor for any portion of my revenue?
Have I filed BOIR with FinCEN since my company was formed?
Does anyone in the US act on behalf of my company in a recurring or operational capacity?
Am I a minority owner holding exactly 25% or more in a company with other foreign co-owners?
A yes to any of these means some level of US tax or reporting obligation likely applies to you. Each question maps to at least one filing requirement covered in this guide - and in most cases, more than one.
These are the mistakes the IRS sees constantly. Each one is avoidable - but only if you know what to look for before the penalty clock starts.
The most common misconception among foreign-owned LLC operators. Zero external revenue does not eliminate Form 5472 obligations if any financial transactions occurred between the owner and the company. Capital contributions, loans, and reimbursements all count as reportable transactions. The $25,000 penalty applies regardless of whether any tax would have been owed.
The disregarded entity label creates a false sense of simplicity. For domestic owners it genuinely is simple. For foreign owners it is not. The LLC is disregarded for income tax - but not for reporting. A pro forma corporate filing is still required. The reporting infrastructure exists even when the tax liability doesn't.
An EIN is required for IRS reporting, US bank accounts, and payment processor registration. Some foreign owners register with Stripe or PayPal using informal identification, creating mismatches that surface later when compliance gaps get reviewed.
A large portion of foreign-owned LLCs formed in 2024 and 2025 have never filed BOIR. Many owners are simply unaware the requirement exists. The daily civil penalty for willful non-compliance is $591 and it accumulates from the missed deadline forward - it doesn't stop until the filing is made.
Selling software or services to US customers through a US LLC does not automatically produce foreign-source income. Classification depends on where services are performed, where contracts are concluded, and whether PE exists. Assuming income is foreign-source without a formal assessment is a real classification risk.
Hiring a US-based virtual assistant for operational tasks is one of the most overlooked PE triggers. If that VA negotiates, closes, or manages client relationships on the company's behalf, the threshold for dependent agent PE may already have been crossed - regardless of what the employment contract says.
If your payment processor has been filing 1099-Ks under your EIN for multiple years and no corresponding returns or Form 5472 filings exist, that gap is growing. Each year without a filing is a separate exposure, and penalties for each year apply independently of each other.
A high-level reference of ongoing obligations for foreign-owned US companies. This is not a procedural filing guide.
Required if any reportable transactions occurred between the LLC and its foreign owner during the year. Due annually with the corporate return deadline, generally April 15.
Required if the LLC has ECI. The form type depends on entity classification - disregarded entity, partnership, or corporation.
One-time initial filing required for most companies. Updates required within 30 days of any change in beneficial ownership information.
The EIN must remain active and accurate. It is the identifier connecting all IRS and FinCEN records to the LLC.
If using US-based processors above IRS thresholds, the company's internal records must align with 1099-K data already filed by those processors.
Maintain a registered agent in the state of formation at all times.
Keep the company in good standing with the state - annual reports and fees vary by state.
Retain full documentation of all financial transactions between the owner and the LLC.
For a detailed breakdown of penalties and enforcement timelines, the Compliance and Reporting for Non-Residents guide covers this in full.
US tax obligations for foreign-owned companies are not difficult because the rules are obscure. They are difficult because the triggers are easy to miss, the terminology is misleading, and the penalties for non-compliance are structured to compound over time.
Your LLC has had any financial activity - including internal transactions - and Form 5472 has not been filed
You use Stripe, PayPal, or any US-based payment processor and have not confirmed your 1099-K filing status
BOIR has not been filed with FinCEN since your company was formed
You have US-based contractors, agents, or virtual assistants in operational roles and have not assessed PE exposure
You are unsure whether your income qualifies as ECI or FDAP
You are a minority foreign owner holding 25% or more and have not confirmed the company's overall compliance status
The cost of a professional compliance review is a fixed, predictable expense you can plan for and control.
Compliance gaps in foreign-owned LLCs frequently go undetected for three to five years - and each year carries its own independent penalty exposure.
Our team works with non-resident founders, NRPs, and global operators who need US tax compliance handled correctly from the start. Contact us to discuss your situation.
The most common questions from non-resident founders and operators about US tax obligations for foreign-owned LLCs and corporations.
Yes, and there's really no way around it. An EIN is required for IRS reporting, including Form 5472 filing, and you will need one to register with US-based payment processors. Foreign owners apply using Form SS-4, which can be submitted by fax or mail for those without a US Social Security Number. Operating a US LLC without an EIN creates registration mismatches that tend to surface at the worst possible time.
Any time a reportable transaction occurs between the LLC and a related foreign party - capital contributions, loans, service payments, property transfers. Revenue from third parties is not what triggers it. Internal financial activity between the owner and the company is enough on its own, even if the business never made a sale.
Yes. A foreign-owned LLC with no revenue but with any reportable transaction between the owner and the company must file Form 5472. The $25,000 penalty for failure to file applies regardless of whether any tax liability existed. Zero income does not equal zero obligation - that is probably the most important thing to take away from this entire guide.
US-based payment processors file Form 1099-K with the IRS for accounts exceeding reporting thresholds. If your LLC's EIN is attached to a Stripe or PayPal account receiving payments above that threshold, the processor submits that data to the IRS independently. It happens regardless of where you live or whether you have filed any US tax returns. The IRS receives the data before you file anything - not after.
BOIR is the Beneficial Ownership Information Report filed with FinCEN under the Corporate Transparency Act. Most US LLCs - including foreign-owned single-member LLCs - are required to file it. The report discloses who owns or controls the company and requires submission of government-issued identification. Companies formed before January 1, 2025 had a filing deadline of January 1, 2026. Companies formed after that must file within 90 days of formation. A FinCEN ID can be used by beneficial owners as an alternative to resubmitting identification documents across multiple filings.
PE is not determined by physical visits. It can be established through a US-based agent who habitually acts on the company's behalf, a contractor who regularly concludes contracts, or a fixed location used for business purposes. A US-based virtual assistant handling client onboarding or contract management can trigger PE even if the owner has never set foot in the US. Remote operation reduces PE risk - it does not eliminate it when US-based parties are performing operational functions for the business.
It depends on where services are performed, where contracts are concluded, and whether PE has been established. Software sold through a US LLC to US customers may be classified as ECI depending on the transaction structure. This is not something to guess at - the answer changes based on how the business is actually operated, not just where the owner lives, and it should be assessed with a qualified tax professional.
These are two entirely separate compliance exposures with two separate penalty structures. The BOIR penalty runs daily from the missed FinCEN deadline. The Form 5472 penalty is assessed per filing year. Both can accumulate simultaneously and independently of each other. Resolving one does nothing to address the other - each requires its own corrective action.
The cost of a professional compliance review is fixed and predictable. The cost of accumulated penalties across multiple unfiled years is not. Our team works with non-resident founders, NRPs, and global operators who need US tax compliance done right.