If you run a software company through a U.S. entity while living abroad, you may be asking whether you need to file Form 5472 with the IRS. The answer doesn’t depend on whether you sell enterprise solutions, consumer software, or developer tools. It depends on the type of entity you formed.
If your company is a foreign-owned single-member LLC or a corporation with at least 25% foreign ownership, then yes, Form 5472 must be filed. If your company is a multi-member LLC taxed as a partnership, Form 5472 usually does not apply.
This guide explains what Form 5472 is, how to know your entity classification, what transactions need to be reported, and why even software companies without revenue must still file. We’ll also walk through a software company example and explain how Bookmate helps keep your filings accurate.
What is Form 5472?
Form 5472 is an IRS information return. It does not calculate or pay tax, but it discloses reportable transactions between your U.S. company and its foreign owners. The IRS uses it to monitor how money moves across borders. If your software company is foreign-owned, you are very likely required to file.
For software companies, common reportable transactions include funding the business from abroad to pay developers, buying software licenses, or reimbursing yourself for costs. Even without customer sales, these transfers still trigger the need to file.
Who must file Form 5472?
The filing requirement is based on entity type:
- A foreign-owned single-member LLC must file Form 5472 with a pro forma Form 1120.
- A U.S. corporation with 25% or more foreign shareholders must file Form 5472 with the full Form 1120.
- A multi-member LLC taxed as a partnership files Form 1065 instead, not Form 5472.
How to know what type of company you have
If you worked with a formation service, you might not know your classification. Here’s how you can tell:
- If you formed an LLC with one owner, you likely have a single-member LLC. Your EIN confirmation letter may list your name with “Sole Mbr” or describe the company as a “disregarded entity.”
- If you formed an LLC with multiple owners, you likely have a multi-member LLC. The EIN letter may list the applicant’s name with “Mbr.” Multi-member LLCs file Form 1065.
- If you formed a corporation (such as a Delaware C-Corp), you must file Form 1120 every year. If 25% or more is foreign-owned, you also file Form 5472.
- If you or an accountant filed Form 8832 or 2553 to change your tax classification, that election overrides the default rules.
What information goes on Form 5472?
The IRS requires company details (name, address, EIN, state of formation), owner information (name, country, ownership percentage), and records of transactions. For software companies, this often means reporting contributions from the owner to cover payroll, software licenses, or product development costs, as well as reimbursements back to the owner.
Even without revenue, these activities require disclosure.
When is Form 5472 due?
Form 5472 follows the corporate tax calendar. For calendar-year companies, the deadline is April 15, with an extension available until October 15 by filing Form 7004. The form must always be attached to a return—either a pro forma Form 1120 (for single-member LLCs) or a full Form 1120 (for corporations).
The IRS imposes a penalty of $25,000 per year for missing or late filings. If you ignore notices, more $25,000 penalties may be added. This applies even when your software company has no customer revenue.
Common questions software founders ask
Does it matter what type of software I sell? No. Whether you sell enterprise platforms or consumer apps, the filing requirement depends on entity type and ownership.
Do I need to file if I had no customers? Yes. If you funded the business, reimbursed yourself, or engaged in other transactions with the company, Form 5472 is required.
What if I already missed a filing? Bookmate does not usually prepare past filings, but we can guide you on how to resolve them.
Staying ahead of filing
Keep clear records of all money moving between you and your company. In software companies, this might include payments for developers, licenses, or hosting fees. Recording these ensures that Form 5472 can be filed accurately. Filing before the deadline avoids stress and heavy penalties.
Example for a software company
A founder in South Korea forms a Delaware single-member LLC to build a new enterprise software platform. In the first year, the company earns no customer revenue, but the founder wires $30,000 into the U.S. account to cover developer salaries and product development costs. Even without income, these transfers are reportable.
The company must file Form 5472 with a pro forma 1120. Filing keeps the company compliant and avoids the $25,000 penalty.
How Bookmate helps software companies
Bookmate focuses on U.S. federal filings for foreign-owned companies. For software businesses, we:
- Prepare and file Form 5472 with the pro forma 1120 for single-member LLCs.
- Prepare and file Form 1120 with Form 5472 attached for corporations.
- File from within the U.S. so submissions are accepted by the IRS.
- Provide guidance on how to approach past filings if you missed them.
We don’t apply for EINs or ITINs directly, but we partner with theitin.com for ITINs and recommend formation companies for EIN assistance. Our role is making sure your IRS filings are timely and penalty-free.
Final thoughts
Running a software company through a U.S. entity as a foreign founder is common, but IRS compliance is crucial. The type of software you sell doesn’t matter—your company’s structure does. If you own a foreign-owned single-member LLC or corporation, Form 5472 is almost always required. Even without customers, you must file if there were owner-related transactions.
Bookmate helps founders around the world file correctly and avoid IRS penalties, giving you peace of mind while you grow your software business.
Learn more at trybookmate.co or book a consultation today.
