If you're a non-U.S. entrepreneur who has launched or is planning to launch a business in the United States, it's important to understand the basic tax rules for your U.S. corporation. Whether you're running a tech startup, a SaaS company, an e-commerce store, or a small consulting business, knowing what the IRS expects from you is key to staying out of trouble.
What Is a Foreign-Owned U.S. Corporation?
A foreign-owned U.S. corporation is a company set up in the U.S. that is at least 25% owned by someone who is not a U.S. person. Even if your business doesn’t make money yet, you still have to file certain tax forms every year.
What Tax Forms Do You Need to File?
1. Form 1120: U.S. Corporation Income Tax Return
Every corporation in the U.S. must file Form 1120 with the IRS each year. This form shows how much money your business made and what your expenses were.
The U.S. taxes corporations at a flat rate of 21% on what’s called "taxable income." That means the money your business made after subtracting business expenses. For example, if your company made $100,000 in sales and had $40,000 in expenses, your taxable income would be $60,000. You’d pay 21% tax on that $60,000.
Even if your business had no sales or made a loss, you still need to file Form 1120.
2. Form 5472: Information Return of a 25% Foreign-Owned U.S. Corporation
If your business had any money dealings with a foreign owner—like sending money, receiving loans, or putting in capital—you need to file Form 5472 with your 1120.
If there was more than one foreign owner or more than one kind of transaction, you might need to file more than one Form 5472. Each one gets attached to the same 1120.
The IRS charges a $25,000 penalty for not filing Form 5472 correctly or on time, so this one is important.
Common Mistakes to Avoid
- Not filing the forms because the business didn’t make money
- Not reporting all foreign owners and transactions correctly
When Are These Forms Due?
The forms are due by the 15th day of the fourth month after your corporation’s year ends. If your business follows the calendar year, the deadline is April 15.
If you use a tax software or work with an accountant, your forms can usually be filed electronically. But if you try to file on your own, you may have to print and mail the forms to the IRS, which can be slow and tricky.
Why You Should Work With an Expert
U.S. tax forms can be confusing, especially if you're new to the system. Most small business owners are busy building their product or finding customers—not reading IRS instructions. That’s why it’s smart to work with a professional who knows U.S. tax rules.
At Bookmate, we help foreign founders and small business owners stay compliant with U.S. tax laws. We'll handle the forms and deadlines, so you can focus on growing your business.
Book a consultation with our tax team today: Schedule Here
Every tax situation is different, so be sure to speak with a Bookmate expert to make sure your corporation is fully compliant with all federal tax requirements.
