Form 5472 for an Indian-Owned US LLC: Who Files, When, and the USD 25,000 Penalty

An Indian resident who owns a single-member US LLC must file IRS Form 5472 with a pro forma Form 1120 for every year in which the LLC has a reportable transaction with its owner, even if the LLC earned nothing and owes no US tax. The penalty for missing it is USD 25,000 per form, per year. For most Indian founders who opened a Delaware or Wyoming LLC online, the first capital contribution is itself a reportable transaction.

Why a company with no US tax has a US filing

A single-member LLC is disregarded for US income tax. Its income is treated as the owner’s, and a non-US owner with no US trade or business often has no US income tax to pay. Since 2017, however, such an LLC is treated as a corporation for one purpose only: reporting under section 6038A. That is what brings in Form 5472.

What counts as a reportable transaction

• money the owner puts into the LLC, including the opening deposit
• distributions and withdrawals to the owner
• loans between the owner and the LLC, and interest on them
• the owner paying formation, registered agent or software costs on the LLC’s behalf
• sales, services, commissions, rent or royalties between the LLC and the owner or the owner’s Indian company

A year with genuinely no such transaction needs no form. In practice that is rare in the first year and for any LLC that moves money to its owner.

How to file

1. Obtain an EIN for the LLC. A foreign owner without a US social security number applies on Form SS-4 by fax or post.
2. Complete Form 5472: details of the LLC, the foreign owner, related parties, and the amounts of each category of transaction.
3. Complete only the name, address and EIN section of Form 1120 and write ‘Foreign-owned U.S. DE’ across the top.
4. Send both by post or by fax to the IRS address and number in the current instructions. Keep the fax confirmation.
5. File Form 7004 by the original due date if more time is needed.

The penalty, and what to do about missed years

The USD 25,000 penalty applies for each failure to file a complete and correct form on time, and for failing to maintain records. If the IRS issues a notice and the failure continues for more than 90 days, a further USD 25,000 applies for each 30-day period. The IRS assesses these penalties systematically. Relief is possible where the taxpayer shows reasonable cause, and a first-time filer who comes forward before the IRS makes contact is in a much stronger position than one who waits. If you have missed years, file the late forms with a reasonable cause statement before any notice arrives.

Beneficial ownership reporting

In March 2025 FinCEN removed the beneficial ownership reporting requirement for companies created in the United States. A Delaware or Wyoming LLC is therefore currently exempt, even if its owner is foreign. This is a separate regime from Form 5472 and the exemption has no effect on the IRS filing.

State filings

Delaware charges an LLC a flat annual tax of USD 300, due 1 June. Wyoming requires an annual report with a minimum licence tax. These are payable whether or not the LLC trades.

The Indian side

• FEMA. Taking membership of a US LLC is overseas direct investment. It needs Form FC and a Unique Identification Number through your bank before money is remitted, and an Annual Performance Report each year. Paying the formation fee by card and funding the US bank account later is the most common contravention we see. See how ODI reporting works, which applies in the same way to a US entity.
• Income tax. The LLC’s profits are taxable in India in the owner’s hands, since the owner is an Indian resident. The LLC interest and its US bank account must be disclosed in the foreign assets schedule of the Indian return; non-disclosure carries a Rs 10 lakh penalty under the Black Money Act.
• Structure. An LLC gives an Indian resident no Indian tax saving. Where the purpose is US customers, payment processing or fundraising, a C-Corp or an Indian company with a US subsidiary may be the better vehicle. See our US entity formation service.

Our US tax compliance team prepares Form 5472 and pro forma Form 1120 filings, including late-year clean-ups, alongside the Indian ODI reporting for the same entity.

Written by Vijay Dhawan, Managing Partner, LexVerge LLP. This article is general information, not tax or legal advice. Rates, thresholds and form numbers change; confirm the current position for your facts before acting.