Even though an LLC formed in the United States might not file a company tax return, there are certain record-keeping or bookkeeping requirements that must be fulfilled by the LLC owner.
Record keeping requirements will depend on how the LLC is taxed.
Below we will discuss and focus on the bookkeeping requirements of foreign owned US disregarded entities, or Single Member US LLC owned by a non resident foreigner, , but first let’s superficially discuss the LLCs bookkeeping requirements if they are owned by US persons so you can better understand Foreign Owned US Disregarded Entities tax situation by comparing their contrast.
Single Meber LLC owned by a US Person
If the LLC is owned by a US person, the LLC itself won’t file a US tax return as they are Disregarded Entities, but the LLC owner will report the income and expenses of the LLC on Schedule C on its personal income tax return Form 1040.
Multimember LLC taxed as Partnership
A Multimember LLC is not taxed on its business income, but it is required to file Form 1065 where the Partnership reports its income (report, but not pay taxes), and then the LLC will issue K-1s to the Partners. Each partner will report its income from the partnership reported by the LLC on its federal personal income tax.
To successfully accomplish this, the Partnership would have to keep complete full accounting books to demonstrate and transfer that information into the Partnership yearly return.
Record Keeping Required for a US Wyoming LLC owned by a non-resident foreigner
Just like LLCs owned by a single member from the US, the LLC itself does not file an income tax return. The foreigner owner will file a federal income tax return if it had US sourced income under form 1040-NR only if it had US sourced income.
Worth mentioning at this point that the owner will not be subject to US taxed if the owner didn’t have US sourced income or if it didn’t engaged in US business or trade.
Nonetheless, US LLCs owned by a foreigner, also known as Foreign Owned US disregarded entities, are required to file an “information tax return” reporting the transactions between the LLC and the Owner, including related parties. These related parties can be other companies owned by the LLC owner, or relatives/family. This information is filled under Form 5472.
This is just for information reporting purposes, and does not constitute a tax return.
A Separate 5472 has to be filled for each related party that the LLC had at least one transaction with.
In addition, the LLC has to send to the IRS form 1120 pro forma, but this one only required basic information about the LLC to be reported, like the address, tax number, LLC name, date formed, and information alike.
You can check the following page where you will find more specific information on how to fill form 1120 Pro Forma and form 5472.
We have designed, and are selling, a U.S. LLC Reportable Transactions Bookkeeping Journal so you can keep track of your yearly reportable transactions, and comply with your bookkeeping requirements.
Disclaimer: The information provided herein is for informational purposes only and should not be construed as, relied upon as, or be a substitute for financial, tax, and/or legal advice. It is recommended to seek the guidance of a licensed attorney and/or advisor for personalized advice tailored to your specific situation.
About the author:
Jean Franco Fernández Clark, Corporate & International Tax Lawyer. Speaks English, Spanish, French, Italian, Russian, Chinese Mandarin. Founder of Offshore Affairs.