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Foreign Owned LLC

I ran across something I don't understand and I hope you can help.

A non-citizen has a single-member LLC in the US. He's required to file Form 5472 - no problem there.

But does he file Form 1040-NR, 1120 or both? I've seen conflicting information, and couldn't find specific information on the IRS website. Perhaps the people saying that a foreign owned single-member LLC is automatically taxed as a corporation think it's a foreign entity rather than a foreign owned entity.

In any case, I'm confused.

Can anyone help straighten me out?

Thanks.

Reply to
Stuart O. Bronstein
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The LLC is created under US state law, so it is a US entity, regardless of ownership. The SMLLC elects to be taxed either as a sole proprietorship or a corporation (SP is the default). If taxed as a corporation, S-corp is off-limits because the owner is not a US tax resident. Once you've determined the answers to the previous statements, the choice of return type should be obvious.

Ira Smilovitz, EA Leonia, NJ

Reply to
ira smilovitz

GW Carter CPAs has a US Tax Guide for just this purpose. See link below.

What it tells you is assuming the LLC has not elected to be a corporation then it is a disregarded entity and would file 1040-NR with a Schedule C if a business or Schedule E if rental property. The 5472 would go with the 1040-NR. Section 6038(a) of the Internal Revenue Code states that because it is owned by a foreign person it is a separate entity classified as a corporation. BUT, this is for reporting purposes only. Taxes are still done on the 1040NR. So, it means that you have to attach a pro-forma 1120 with the 5472 and 1040-NR. Pay careful attention as there are stiff penalties for failing to conform to these rules.

The tax guide below goes into this with a lot of detail and instructions.

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Reply to
Tempuser

Thanks Alan. That not only makes it clear but it makes sense.

Reply to
Stuart O. Bronstein

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