Tax Reporting for Single-Member LLCs Owned by Foreign Persons
If you are a non-resident in the USA and own an LLC Registration in the United States, your LLC is by default treated as a “disregarded entity” for tax reasons.
Thus, the profit earned by USA LLC is treated as the owners’ income. Hence, such income is recorded directly on the owner’s personal tax return and the LLC does not pay taxes.
However, if elected, LLC is to be treated as a corporation for tax reasons, and then LLC must pay flat 21% taxes on profit (i.e., revenue-expense), regardless of source or whether you got a 1099-K.
How to know whether an LLC is a disregarded entity or corporation?
If your LLC has only one member, it will be recognised as a disregarded entity by default, which means that its revenue and spending will be recorded on your personal tax return.
However, if your LLC has many members, it is usually recognized as a partnership and gets corporate status.
To identify your LLC’s current status, you can consult experts from our team.
Tax Filing Requirements for Non-Resident Amazon Sellers
If you’re a non-resident selling on Amazon and have previously completed a W8-BEN form to prove your foreign status, converting to a US single-member LLC will normally not affect how you’re taxed.
Furthermore, most non-residents who sell on Amazon but do not have a physical presence in the United States are not considered to be involved in a trade or company within the country by the IRS.
As a result, This means that the money you earn from Amazon sales is unlikely to be “effectively connected” to the US economy, and so you may not be required to pay US income taxes on it.
Other Essential IRS Forms for Non-Resident Owners
| Form | Who Needs to File? | Why is it Necessary? / What is it? |
| Form – 1040-NR | If you elected LLC to be treated as a disregarded entity. | The owner of the LLC has to file his/her personal tax return and pay tax at the rate of 10-37% on the LLC’s profit. |
| Form 5472 (Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business) | If your LLC is foreign-owned, even as a disregarded entity, you must file Form 5472 along with a pro forma Form 1120 to report transactions between the LLC and its foreign owner. | This form is required by the IRS to monitor foreign investments in U.S. entities. Failing to file can result in substantial penalties, even if no taxes are due. |
| Form 1120 (U.S. Corporation Income Tax Return) – Pro Forma | A foreign-owned LLC treated as a disregarded entity must submit a pro forma Form 1120 when filing Form 5472. | A pro forma Form 1120 is a simplified version of the standard form, acting as a cover sheet for Form 5472. It does not indicate that the LLC is taxed as a corporation and does not calculate any tax owed. |
