How is a single-member LLC taxed?

By default the IRS disregards it for federal income tax, meaning the company files no income tax return of its own and the profit is reported by the owner. A disregarded LLC can elect to be taxed as an S-Corporation or C-Corporation instead, which changes the treatment without changing the legal entity.

Does a foreign-owned LLC with no income still have to file?

Yes. A single-member LLC with a foreign owner must file Form 5472 attached to a pro forma Form 1120 annually, reporting transactions between the company and its owner. This applies with zero revenue and zero activity, and the penalty for failing to file starts at $25,000.

When is the S-Corp election worth making?

It becomes worth considering once the business earns meaningfully more than a reasonable salary for the work performed, because only the salary portion carries self-employment tax. The threshold is commonly discussed in the region of $40,000–$60,000 of profit, but it depends on your salary level, state and payroll costs. Model it before electing.

Do I owe US tax if I live abroad and my customers are American?

Not necessarily. The test is whether the income is effectively connected with a US trade or business, which turns on where the work happens and whether you have US employees, an office or a dependent agent — not simply on where your customers live. It is a fact-specific determination and worth getting advice on.

What happens if I file late?

Penalties differ by form. Late income tax returns generally accrue a percentage of unpaid tax per month, and interest runs on the balance. Information returns such as Form 5472 carry flat penalties regardless of tax owed. First-time penalty abatement exists for some taxpayers with a clean history — it is worth asking for.

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Stay compliant · 5 min read

US business taxes: every form, deadline and obligation

Filing and owing are different questions, and confusing them is expensive in both directions. Here is what you file, when, and what the penalties actually are.

The short answer

How a US company is taxed depends on its entity type and elections. A single-member LLC is disregarded by default, so profit is taxed to the owner. A C-Corporation pays 21% federal tax on its own profit. A foreign-owned single-member LLC must file Form 5472 with a pro forma Form 1120 every year, even with no revenue — the penalty for missing it is $25,000.

Two questions get run together constantly, and separating them removes most of the confusion in this area.

"What do I have to file?" and "what do I have to pay?" are different questions with different answers. Plenty of companies owe nothing and must still file. A few owe a great deal and think they are invisible.

How the entity gets taxed

Entity	Default federal treatment	Files
Single-member LLC, US owner	Disregarded — profit taxed to the owner	Schedule C with the owner's 1040
Single-member LLC, foreign owner	Disregarded for income tax	Form 5472 + pro forma 1120, every year
Multi-member LLC	Partnership	Form 1065, K-1 to each member
LLC electing S-Corp	Pass-through with payroll	Form 1120-S
C-Corporation	21% at company level	Form 1120

Default treatments under current IRS rules as at August 2026. Elections change the treatment; check current guidance for your facts.

The filing foreign owners miss

This is the single most expensive gap in the category. Founders form an LLC, never trade through it, assume a dormant company has no obligations, and discover otherwise years later. If you have an idle LLC, this is the thing to check today — and dissolving it properly is far cheaper than leaving it unfiled.

Federal tax filing

Form 5472 and the pro forma 1120 prepared and filed for foreign-owned LLCs, with the deadline tracked so a quiet year doesn't become a penalty notice.

See what's included

Do you actually owe US income tax?

For a foreign owner, the question is whether the income is effectively connected income with a US trade or business. If it is, it is taxed at graduated US rates. If it is not, US federal income tax frequently does not apply.

What tends to matter: where the work is physically performed, whether you have US employees, whether you have a US office, and whether someone in the US habitually concludes contracts on your behalf. What tends to matter less than founders expect: where your customers happen to live.

The S-Corp election

For US-resident owners of a profitable LLC, electing S-Corp treatment can reduce self-employment tax. The mechanism: you pay yourself a reasonable salary, which carries employment taxes, and take the remaining profit as a distribution, which does not.

The catch is "reasonable". Paying yourself $12,000 on $200,000 of profit invites scrutiny. And the election brings payroll filings, a separate corporate return, and accounting cost — commonly a few thousand dollars a year — which is why it is not worth making at low profit.

The deadlines

Return	Who files	Typical due date
Form 1065 (partnership)	Multi-member LLCs	15 March
Form 1120-S	S-Corps	15 March
Form 1120 / 5472	C-Corps; foreign-owned single-member LLCs	15 April
Form 1040 / Schedule C	US individual owners	15 April
Form 1040-NR	Non-resident individuals with a US filing need	15 April or 15 June, depending on facts
Estimated tax	Owners with a US liability	Quarterly

Dates shift for weekends, holidays and disaster relief, and vary for fiscal-year filers. Confirm each year against the IRS calendar.

Sales tax is a separate system

Sales tax has nothing to do with income tax. It is administered by states, not the IRS, and the obligation is triggered by nexus — a connection with a state, either physical or economic.

Economic nexus is created by exceeding a state's sales or transaction threshold. Thresholds differ by state and have been revised repeatedly, so treat any list you find as a starting point and verify current figures. Marketplace facilitator laws shift the collection duty to Amazon or Etsy for sales made through them, which helps — but not for sales through your own site.

Deductions worth getting right

Software, hosting and tools used for the business.
Contractor payments — with a W-9 collected and a 1099-NEC issued where required.
Professional fees — accounting, legal, formation costs.
Home office, on a properly apportioned basis, if you meet the exclusive-use test.
Business travel, with contemporaneous records of purpose.
Payment processing fees — commonly missed by founders who record only net deposits.

The standard is that an expense be ordinary and necessary for the business. The practical constraint is evidence: a bank line shows money left, not what it bought. Keep receipts as you go.

Where to go next

Compliance covers the state-level filings that run alongside these federal ones. Good bookkeeping is what makes any of this straightforward.

Frequently asked questions

How is a single-member LLC taxed?: By default the IRS disregards it for federal income tax, meaning the company files no income tax return of its own and the profit is reported by the owner. A disregarded LLC can elect to be taxed as an S-Corporation or C-Corporation instead, which changes the treatment without changing the legal entity.
Does a foreign-owned LLC with no income still have to file?: Yes. A single-member LLC with a foreign owner must file Form 5472 attached to a pro forma Form 1120 annually, reporting transactions between the company and its owner. This applies with zero revenue and zero activity, and the penalty for failing to file starts at $25,000.
When is the S-Corp election worth making?: It becomes worth considering once the business earns meaningfully more than a reasonable salary for the work performed, because only the salary portion carries self-employment tax. The threshold is commonly discussed in the region of $40,000–$60,000 of profit, but it depends on your salary level, state and payroll costs. Model it before electing.
Do I owe US tax if I live abroad and my customers are American?: Not necessarily. The test is whether the income is effectively connected with a US trade or business, which turns on where the work happens and whether you have US employees, an office or a dependent agent — not simply on where your customers live. It is a fact-specific determination and worth getting advice on.
What happens if I file late?: Penalties differ by form. Late income tax returns generally accrue a percentage of unpaid tax per month, and interest runs on the balance. Information returns such as Form 5472 carry flat penalties regardless of tax owed. First-time penalty abatement exists for some taxpayers with a clean history — it is worth asking for.

Topics in this guide

Sources

Last reviewed August 23, 2026. Fees, deadlines and government processing times change — verify against the primary source before acting.

Founders 8 does not provide tax advice. Tax residency depends on facts and rules specific to each jurisdiction — review your position with a qualified adviser.