Foreign Owned LLC

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

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.

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