Guides for founders running US companies.
Short explainers on the forms and filings founders ask about most. They are general information, not advice for your situation.
Do I need to file Form 5472?
Form 5472 is an information return filed by a “reporting corporation”. That includes a 25% foreign-owned US corporation, and a foreign-owned US disregarded entity such as a single-member LLC owned by a foreign person. It is required when the company had reportable transactions with a related party.
What it reports: transactions with foreign or domestic related parties, for example payments, loans or other dealings between the company and its owner or other related parties.
How and when it is filed: attached to the company’s income tax return and due when that return is due, including extensions. A foreign-owned disregarded entity has no income tax return of its own, so it files Form 5472 with a pro forma Form 1120, and cannot e-file it.
The penalty: $25,000 for failing to file Form 5472 or to keep the required records. If the failure continues more than 90 days after the IRS notifies you, an additional $25,000 applies for each 30-day period.
Not every company has to file. It depends on who owns the company and what transactions took place. We check this for you.
Sources: IRS, Instructions for Form 5472
Delaware franchise tax and annual report: the basics
Corporations: the annual report and franchise tax are due on or before March 1 and are filed online. Delaware offers two ways to calculate the tax, the authorized shares method and the assumed par value capital method. They can give very different amounts, so it is worth checking both before you pay.
LLCs: a Delaware LLC pays an annual tax (currently $400) on or before June 1. No annual report is required for an LLC.
Late filing: Delaware adds a $200 penalty plus interest of 1.5% per month on the tax and the penalty.
Amounts and rules change, so always confirm the current figures with the Delaware Division of Corporations.
W-8BEN and W-8BEN-E: what they are
These are IRS forms a foreign person gives to a US payer, such as a company paying them, to document their foreign status for US tax withholding and reporting. Foreign individuals use Form W-8BEN. Foreign entities use Form W-8BEN-E.
The IRS describes Form W-8BEN-E as the form foreign entities use to document their status for purposes of chapter 3 and chapter 4, the US withholding rules. The forms are also where a foreign person can claim tax treaty benefits, when they apply.
If you pay a foreign person or entity, ask for the right form before you pay. Whether withholding applies, and at what rate, depends on the type of payment and who receives it. That is where Forms 1042 and 1042-S can come in.
Sources: IRS, About Form W-8BEN-E
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