Franchise tax help for non-U.S. residents

Comprehensive guidance for non-U.S. residents running U.S. businesses (LLCs/corps): federal and state franchise/annual compliance, withholding, and practical next steps. Executive summary - Federal: Foreign-owned U.S. entities face significant federal reporting (Form 5472 for 25%+ foreign ownership or foreign-owned single-member LLCs with reportable transactions; partnership withholding under IRC §1446; withholding/reporting on FDAP income via Forms 1042/1042-S).

Foreign owners need proper U.S. taxpayer IDs (EIN for entities; ITIN for individuals when required). Penalties for non-filing are large (e.g., $25,000+ for Form 5472). (See IRS citations below.) - State: Each state has separate annual/“franchise”/reporting requirements that can apply regardless of whether federal tax is owed.

Selected state highlights: - Delaware: Corporations must file annual report and pay franchise tax (due March 1) with minimums; LP/LLC/GP pay a $300 annual tax due June 1; penalties and interest apply for late payment.

Delaware is formation-friendly but taxes still apply. (Delaware citation) - California: LLCs doing business or registered in CA must pay the $800 annual franchise tax (even if no activity) and may owe an LLC fee based on gross receipts (tiered schedule).

First-year exceptions and due-date rules are important. (California FTB citation) - Texas: The Texas franchise tax is a privilege tax; annual report due May 15. Texas posts thresholds, rates, and “no tax due” revenue thresholds—watch nexus and apportionment. (Texas Comptroller citation) - Wyoming: Low-cost annual report (minimum $60 or $0.0002 of assets in WY, whichever is greater).

Popular for nonresident owners for simplicity and low fees. (Wyoming SOS citation) - Other states (Florida, Nevada, New York, etc.): Each has annual reports, business license or list fees and deadlines — don’t rely on formation state only; you may have to foreign-qualify and file annual reports where you do business.

Federal filing and withholding essentials (what non-U.S. residents must know) 1) Form 5472 + pro-forma Form 1120 (foreign-owned single-member U.S. DEs): - Foreign-owned single-member LLCs that have reportable transactions with related parties must file Form 5472 and a pro-forma Form 1120 (marking the forms “Foreign-Owned U.S.

DE”). A U.S.

EIN is required. Due dates and a six-month extension are available; failure to file can trigger $25,000+ penalties per form. (IRS Form 5472; HCVT summary) 2) Partnership withholding (IRC §1446): - Partnerships with foreign partners generally must withhold on effectively connected taxable income allocable to foreign partners and file/pay on Forms 8804/8805 (with installment rules) and notify foreign partners.

Partnerships may also need to withhold on FDAP income and report on Forms 1042/1042-S. (IRS Publication 515; IRS helpful hints for partnerships) 3) FDAP withholding and Form 1042/1042-S: - Withholding agents paying U.S.-source FDAP income to foreign persons (interest, dividends, rents, royalties, certain service income) must handle chapter 3/4 withholding and file Forms 1042/1042-S (Form 1042 due annually; 1042-S due March 15).

Use Forms W-8 series to document foreign status and rely on tax treaties where applicable. (IRS Pub. 515) 4) TIN requirements: EIN and ITIN - Entities need an EIN (SS-4); foreign-owned DEs must obtain EIN to file 5472.

Individuals who must file U.S. tax returns and don’t qualify for SSN must get an ITIN (Form W-7). Expired ITINs and missing TINs can block refunds or create complications. (IRS citations) State/franchise specific practical notes and traps - Franchise/annual fees apply even with no activity in many states.

CA ($800), DE (corporate minimums; LLC/LP $300), TX (franchise tax due May 15; thresholds apply), WY (low annual fee), NV/FL/NJ/NY each have their own annual lists/business license/fees. Always check both the state of formation and states where you have customers, property, employees, or other nexus. (State citations: Delaware, California, Texas, Wyoming) - Nexus: Economic nexus, property, payroll, or even sales activity can create state filing obligations.

Having a U.S. bank account, fulfillment center, employees or contractors, or storing inventory in a state likely creates nexus. - Withholding on distributions to foreign owners: State withholding rules vary (some states require withholding on distributions to nonresident members); federal withholding also applies for FDAP and partnership ECI shares.

Check state tax agencies for each state where you have members/customers/property. Practical compliance checklist for non-U.S. owners (actionable steps) 1) Obtain necessary IDs: apply for entity EIN (SS-4) immediately; foreign individuals who will file returns get ITINs (Form W-7) as needed. 2) Determine entity classification: confirm federal classification (disregarded entity, partnership, or corporation) and consequences for Form 5472, partnership withholding, or corporate returns. 3) Form 5472 prep (if foreign-owned SMLLC or 25%+ foreign owner): collect and document related-party transactions (contributions, distributions, loans, payments), prepare pro-forma 1120, file by the due date and mark forms correctly.

Consider professional help—penalties are steep. (IRS & HCVT) 4) Partnerships: estimate and remit §1446 withholding installments on time (Forms 8804/8813/8805) and notify foreign partners. Keep partners’ TINs current. (IRS guidance) 5) FDAP flows: implement W-8 forms for vendors/beneficial owners; withhold and report on Forms 1042/1042-S where required.

Use tax treaties to reduce/avoid withholding where treaty benefits apply and are properly documented. (IRS Pub. 515) 6) State compliance: for each state where you formed or do business, check annual report due dates, franchise taxes, minimums, and foreign-qualification requirements.

Pay annual fees on time and file required statements (e.g., DE March 1 corporate report; DE LLC/LP tax due June 1; CA LLC $800 due; TX franchise May 15; WY minimal annual report). (State citations)

Comprehensive guidance for non-U.S. residents running U.S. businesses (LLCs/corps): federal and state franchise/annual compliance, withholding, and practical next steps. Executive summary - Federal: Foreign-owned U.S. entities face significant federal reporting (Form 5472 for 25%+ foreign ownership or foreign-owned single-member LLCs with reportable transactions; partnership withholding under IRC §1446; withholding/reporting on FDAP income via Forms 1042/1042-S).

Foreign owners need proper U.S. taxpayer IDs (EIN for entities; ITIN for individuals when required). Penalties for non-filing are large (e.g., $25,000+ for Form 5472). (See IRS citations below.)

1) with minimums; LP/LLC/GP pay a $300 annual tax due June 1; penalties and interest apply for late payment. Delaware is formation-friendly but taxes still apply. (Delaware citation) - California: LLCs doing business or registered in CA must pay the $800 annual franchise tax (even if no activity) and may owe an LLC fee based on gross receipts (tiered schedule).

First-year exceptions and due-date rules are important. (California FTB citation)

15. Texas posts thresholds, rates, and “no tax due” revenue thresholds—watch nexus and apportionment. (Texas Comptroller citation) - Wyoming: Low-cost annual report (minimum $60 or $0.0002 of assets in WY, whichever is greater).

Popular for nonresident owners for simplicity and low fees. (Wyoming SOS citation)

1) Form 5472 + pro-forma Form 1120 (foreign-owned single-member U.S. DEs): - Foreign-owned single-member LLCs that have reportable transactions with related parties must file Form 5472 and a pro-forma Form 1120 (marking the forms “Foreign-Owned U.S.

DE”). A U.S.

EIN is required. Due dates and a six-month extension are available; failure to file can trigger $25,000+ penalties per form. (IRS Form 5472; HCVT summary) 2) Partnership withholding (IRC §1446): - Partnerships with foreign partners generally must withhold on effectively connected taxable income allocable to foreign partners and file/pay on Forms 8804/8805 (with installment rules) and notify foreign partners.

Partnerships may also need to withhold on FDAP income and report on Forms 1042/1042-S. (IRS Publication 515; IRS helpful hints for partnerships) 3) FDAP withholding and Form 1042/1042-S: - Withholding agents paying U.S.-source FDAP income to foreign persons (interest, dividends, rents, royalties, certain service income) must handle chapter 3/4 withholding and file Forms 1042/1042-S (Form 1042 due annually; 1042-S due March 15).

Use Forms W-8 series to document foreign status and rely on tax treaties where applicable. (IRS Pub. 515) 4) TIN requirements: EIN and ITIN - Entities need an EIN (SS-4); foreign-owned DEs must obtain EIN to file 5472.

Individuals who must file U.S. tax returns and don’t qualify for SSN must get an ITIN (Form W-7). Expired ITINs and missing TINs can block refunds or create complications. (IRS citations) State/franchise specific practical notes and traps - Franchise/annual fees apply even with no activity in many states.

CA ($800), DE (corporate minimums; LLC/LP $300), TX (franchise tax due May 15; thresholds apply), WY (low annual fee), NV/FL/NJ/NY each have their own annual lists/business license/fees. Always check both the state of formation and states where you have customers, property, employees, or other nexus. (State citations: Delaware, California, Texas, Wyoming)

1) Obtain necessary IDs: apply for entity EIN (SS-4) immediately; foreign individuals who will file returns get ITINs (Form W-7) as needed. 2) Determine entity classification: confirm federal classification (disregarded entity, partnership, or corporation) and consequences for Form 5472, partnership withholding, or corporate returns. 3) Form 5472 prep (if foreign-owned SMLLC or 25%+ foreign owner): collect and document related-party transactions (contributions, distributions, loans, payments), prepare pro-forma 1120, file by the due date and mark forms correctly.

Consider professional help—penalties are steep. (IRS & HCVT) 4) Partnerships: estimate and remit §1446 withholding installments on time (Forms 8804/8813/8805) and notify foreign partners. Keep partners’ TINs current. (IRS guidance) 5) FDAP flows: implement W-8 forms for vendors/beneficial owners; withhold and report on Forms 1042/1042-S where required.

Use tax treaties to reduce/avoid withholding where treaty benefits apply and are properly documented. (IRS Pub. 515) 6) State compliance: for each state where you formed or do business, check annual report due dates, franchise taxes, minimums, and foreign-qualification requirements.

Pay annual fees on time and file required statements (e.g., DE March 1 corporate report; DE LLC/LP tax due June 1; CA LLC $800 due; TX franchise May 15; WY minimal annual report). (State citations)

• State: Each state has separate annual/“franchise”/reporting requirements that can apply regardless of whether federal tax is owed. Selected state highlights:
• Delaware: Corporations must file annual report and pay franchise tax (due March
• Texas: The Texas franchise tax is a privilege tax; annual report due May
• Other states (Florida, Nevada, New York, etc.): Each has annual reports, business license or list fees and deadlines — don’t rely on formation state only; you may have to foreign-qualify and file annual reports where you do business. Federal filing and withholding essentials (what non-U.S. residents must know)
• Nexus: Economic nexus, property, payroll, or even sales activity can create state filing obligations. Having a U.S. bank account, fulfillment center, employees or contractors, or storing inventory in a state likely creates nexus.
• Withholding on distributions to foreign owners: State withholding rules vary (some states require withholding on distributions to nonresident members); federal withholding also applies for FDAP and partnership ECI shares. Check state tax agencies for each state where you have members/customers/property. Practical compliance checklist for non-U.S. owners (actionable steps)

BOI/FinCEN and banking

complete Beneficial Ownership Information (BOI) filings if applicable; banks will also require KYC documents. Keep registered agent and contact info current.

Retain records 7+ years and coordinate with local tax counsel for treaty analysis and state apportionment rules. Recommended next steps - Get an initial compliance assessment with a U.S. CPA or tax attorney who handles foreign-owned entities (Form 5472, §1446 issues, and state filings). - Gather entity docs, operating agreements, bank statements and all intercompany transaction records before year-end to enable correct 5472 and state filings. - Create an annual calendar (Federal and each relevant state) for

Form 5472/pro-forma 1120, partnership withholding installments, Forms 1042/1042-S, state annual reports and franchise taxes.