Foreign nationals who own U.S. companies face strict IRS and Treasury reporting rules that go far beyond filing an annual tax return. Many foreign-owned U.S. LLCs believe that if there is little or no activity, reporting is unnecessary — this is incorrect.

This guide explains the core compliance obligations for foreign-owned U.S. entities, including Form 5472, BOI reporting, withholding requirements, and why these entities receive heightened IRS scrutiny.

What Is a Foreign-Owned U.S. Company?

A U.S. company is considered foreign-owned when a non-U.S. person directly or indirectly owns at least 25% of the entity. This includes single-member LLCs owned by foreign individuals or foreign companies, as well as multi-member structures.

Form 5472 Explained

Form 5472 is an informational return required to disclose ownership and related-party transactions between a U.S. entity and its foreign owners or affiliates. It applies even if the company has no income or activity.

Form 5472 is typically filed with a pro forma Form 1120 for foreign-owned single-member LLCs.

Related-Party Transactions That Must Be Reported

Reportable transactions include capital contributions, loans, reimbursements, management fees, interest, and payments for services. Many taxpayers fail to recognize that even simple transfers of funds must be disclosed.

BOI Reporting with FinCEN

In addition to IRS reporting, foreign-owned U.S. companies must comply with Beneficial Ownership Information (BOI) reporting requirements administered by FinCEN. Failure to report or update ownership information can result in civil and criminal penalties.

Withholding Tax Obligations for Foreign Owners

Payments made to foreign owners may be subject to U.S. withholding tax. Common examples include dividends, interest, royalties, and certain service payments. Proper withholding and reporting are essential to avoid penalties.

Why Foreign-Owned U.S. Companies Face Increased IRS Scrutiny

The IRS closely monitors foreign-owned entities due to the risk of profit shifting, unreported income, and treaty abuse. Information reported on Form 5472 is frequently cross-checked with other filings and data sources.

Penalties for Missing Form 5472 and BOI Reports

Form 5472 carries a base penalty of $25,000 per year per form, with additional penalties for continued non-compliance. BOI violations may result in significant fines and potential criminal exposure.

How to Fix Past Non-Compliance

Taxpayers who failed to file Form 5472 or BOI reports may still have options to correct prior filings and mitigate penalties, depending on timing and intent. Early action is critical.