Foreign owned LLC tax filing with no reportable transactions

[Mastrok]

I own a single member foreign owned LLC (Delaware) and given these parameters:

• I have done no business and thus no transactions at all since company formation last summer
• i am not a US citizen, i do not live in the US, foreign owned ( I am sole owner) LLC
• Company have no physical presence in the US

The company have ZERO activity and no money went through it except formation and registred agent fees. I plan to terminate it soon.


What actually do i have to file ?

1. Form 1120 and form 5472
2. Proforma form 1120 only
3. Proforma 1120 and form 5472

Help!

Thanks.

 

[TacitusKilgore]

Hi Mastrok.

Please don't take my conclusions as professional advice, but I've done some reading through the forms and their instructions and based on the information in your post, you will not need to file either form.

Form 5472 - link https://www.irs.gov/pub/irs-pdf/f5472.pdf and instructions https://www.irs.gov/pub/irs-pdf/i5472.pdf
You may rely on Exception 1 (which is printed in the instructions for form 5472), PROVIDED THAT your LLC "had no reportable transactions of the types listed in Parts IV and VI of the form". Given that the company has no transactions at all you obviously won't have had any reportable transactions.

For the avoidance of doubt, I note that Exception 1 may be relied upon regardless of whether or not your LLC is be considered a "foreign-owned DE" (that is, a foreign-owned disregarded entity) - which yours will be.


Form 1120-F - link https://www.irs.gov/pub/irs-pdf/f1120f.pdf and intructions https://www.irs.gov/pub/irs-pdf/i1120f.pdf
Again our trusty friend Exception 1 (refer instructions for form 1120) states that a "foreign corporation does not have to file Form 1120-F if neither the foreign corporation nor any of its branches was a [qualified derivatives dealer] and any of the following apply [...] It did not engage in a U.S. trade or business during the year, and its full U.S. tax was withheld at source."

I am 99.99% sure you're not a 'qualified derivatives dealer', and you did not engage in any transactions therefore there was no US trade or business and no tax was needed to be withheld. It's also common sense that you don't need to file this form if you had no transactions, and if in the future someone tells you that it should have been filed you have common sense and logic on your side.


Hope this helps,
Tacitus

 

[fshore]

I own a single member foreign owned LLC (Delaware) and given these parameters:

• I have done no business and thus no transactions at all since company formation last summer
• i am not a US citizen, i do not live in the US, foreign owned ( I am sole owner) LLC
• Company have no physical presence in the US

The company have ZERO activity and no money went through it except formation and registred agent fees. I plan to terminate it soon.


What actually do i have to file ?

1. Form 1120 and form 5472
2. Proforma form 1120 only
3. Proforma 1120 and form 5472

Help!

Thanks.

If you paid the registered agent and other fees with your personal card then you should file. If you paid with company card then don’t need to file if there was no other transaction.
I believe you need to file when you terminate it as that will be a reportable transaction.

 

[Mastrok]

If you paid the registered agent and other fees with your personal card then you should file. If you paid with company card then don’t need to file if there was no other transaction.
I believe you need to file when you terminate it as that will be a reportable transaction.

Thank you for your response

I paid with personal card and from what i can gather i have to file a proforma form 1120 and form 5472 especially section 5 that reports expenses of company formation.

With time now tight i feel there is a lot of overlapping in these forms Instructions. Would appreciate it if there is some guide that make it easier and faster to get the hang of it.
Thanks,

 

[fshore]

Thank you for your response

I paid with personal card and from what i can gather i have to file a proforma form 1120 and form 5472 especially section 5 that reports expenses of company formation.

With time now tight i feel there is a lot of overlapping in these forms Instructions. Would appreciate it if there is some guide that make it easier and faster to get the hang of it.
Thanks,

IRS has extended deadline until June 15th

 

[TacitusKilgore]

Honestly, the initial formation fee is not something that has to be considered a business expense incurred by the company itself.
You paid for the formation, yes, but it can be considered a personal expense and truthfully for how cheap it is that makes a lot more sense in your situation.

The company had no income, therefore you aren't going to have to pay any tax. You won't get given any money back by the IRS, even if you consider the formation fee a business expense and fill out form 1120-F. Why bother going through all this red tape to effectively lodge a form saying you owe them nothing and they owe you nothing?

At the end of the day, if you want to lodge the forms.. obviously go ahead, I just think it sounds like a waste of time when you can clearly rely on an exception to lodging provided in the instructions for both forms.

 

[JustAnotherNomad]

Can't really help you, but if the company is owned by you as an individual (and not another company), then I believe 1120-F is not the right form anyway, but 1040-NR.
So check out form 1040-NR.
But I believe 1040-NR doesn't have to be filed either in your case.

 

[TacitusKilgore]

You are right JustAnotherNomad, this (1120-F) is not the right form to be filing. Many thanks.

Also check out form 1120 without the F. This may be the correct form depending on how your company is set up.

 

[Mastrok]

Honestly, the initial formation fee is not something that has to be considered a business expense incurred by the company itself.
You paid for the formation, yes, but it can be considered a personal expense and truthfully for how cheap it is that makes a lot more sense in your situation.

The company had no income, therefore you aren't going to have to pay any tax. You won't get given any money back by the IRS, even if you consider the formation fee a business expense and fill out form 1120-F. Why bother going through all this red tape to effectively lodge a form saying you owe them nothing and they owe you nothing?

At the end of the day, if you want to lodge the forms.. obviously go ahead, I just think it sounds like a waste of time when you can clearly rely on an exception to lodging provided in the instructions for both forms.

I would love to avoid any of this. However, in form 5472 Part 5 - as per the text- the expenses for company formation.. etc need to be filed in a separate sheet and attached. I don't wish to leave $25k penalty to doubt and also can't afford an accountant to do this for me currently.

Quote from form 5472

eportable Transactions of a Reporting Corporation That is a Foreign-Owned U.S. DE (see instructions)
Describe on an attached separate sheet any other transaction as defined by Regulations section 1.482-1(i)(7),
such as amounts paid or received in connection with the formation, dissolution, acquisition, and disposition
of the entity, including contributions to and distributions from the entity

 

[Mastrok]

IRS has extended deadline until June 15th

Does this include foreign disregarded entities?

 

[TacitusKilgore]

I would love to avoid any of this. However, in form 5472 Part 5 - as per the text- the expenses for company formation.. etc need to be filed in a separate sheet and attached. I don't wish to leave $25k penalty to doubt and also can't afford an accountant to do this for me currently.

Quote from form 5472

I can absolutely guarantee that not every single formation fee is accounted for in the newly-created company. If you want to make the work for yourself and fill this form out, go ahead, however what I am suggesting is legal and commonplace. It is not a requirement to incur the formation fee in the name of the company, because you were the one that paid it in the first place anyway. You can keep the formation fee as a personal expense in your name, not account for it as the company, and not have to fill out form 5472.

 

[Mastrok]

Can't really help you, but if the company is owned by you as an individual (and not another company), then I believe 1120-F is not the right form anyway, but 1040-NR.
So check out form 1040-NR.
But I believe 1040-NR doesn't have to be filed either in your case.

Yes. 1040-NR for income but i have absolutely none so i do not file it.

 

[fshore]

IRS has extended deadline until June 15th

I found one link saying no, so maybe not.

 

[JustAnotherNomad]

If you are so worried, just ask a CPA. Shouldn’t be more than $100 per hour and it can hardly be a lot of work.

 

[fshore]

I found one link saying no, so maybe not.

But 5472 doesn't have its own deadline, so more likely that it follows the 1120 deadline.

 

[fshore]

If you are so worried, just ask a CPA. Shouldn’t be more than $100 per hour and it can hardly be a lot of work.

Most cpas don't know much about foreign tax situations and those that do charge more than $100. I paid $1200 last time I asked mine a few questions.

 

[JustAnotherNomad]

I have a CPA who knows a lot about international taxes and charges only 100$ per hour. Found him on Google.

 

[Mastrok]

I can absolutely guarantee that not every single formation fee is accounted for in the newly-created company. If you want to make the work for yourself and fill this form out, go ahead, however what I am suggesting is legal and commonplace. It is not a requirement to incur the formation fee in the name of the company, because you were the one that paid it in the first place anyway. You can keep the formation fee as a personal expense in your name, not account for it as the company, and not have to fill out form 5472.

So i can keep all expenses (formation, certification including copies, registered agent ) before business start date as personal expenses, I like this. In this case should i fill proforma form 5472 (name, address, EIN only) and attach it to proforma form 1120 OR not include it at all ?

Thanks for bearing with me, I just want to do it as cleanly as possible.

 

[Mastrok]

I found one link saying no, so maybe not.

From IRS, the only upside to COVID-19, well not much of an upside

https://www.irs.gov/newsroom/tax-da...ederal-tax-payments-regardless-of-amount-owed

 

[fshore]

From IRS, the only upside to COVID-19, well not much of an upside

https://www.irs.gov/newsroom/tax-da...ederal-tax-payments-regardless-of-amount-owed

Yes, but it doesn't mentioned 5472. Some accountants says it's not extended. But I'm not sure as 5472 doesn't seem to have its own deadline.

So i can keep all expenses (formation, certification including copies, registered agent ) before business start date as personal expenses, I like this. In this case should i fill proforma form 5472 (name, address, EIN only) and attach it to proforma form 1120 OR not include it at all ?

If there are no transactions then you shohldnt file. But I think it's not clear that those are not transactions on behalf of the business. If you created the llc in 2019 then I believe you should file anyway as that would be a reportable event.