Delaware will incorporate your startup in a day without asking where you sleep at night. The IRS is a different counterparty. The moment a US entity has foreign owners, or a founder with US tax residency has foreign entities and accounts, you enter the international information reporting regime, and it is unlike ordinary tax in one crucial way: the penalties are fixed-dollar amounts that have nothing to do with income. A pre-revenue startup that owes zero tax can still owe a $25,000 penalty for a form it did not know existed.
This guide is for foreign founders incorporating in the US, for US startups with 25 percent or greater foreign ownership or foreign subsidiaries, and for founders who moved to the US while keeping entities and bank accounts back home. It is the international sibling of our Delaware C-corp tax guide, which covers the domestic filings every startup owes. Everything here is additive: the domestic list still applies.
The Forms at a Glance
| Form | What it is | Who files | When | Penalty for failure |
|---|---|---|---|---|
| 5472 | Reportable-transaction disclosure | 25 percent foreign-owned US corporations and foreign-owned US disregarded LLCs | With Form 1120 (or pro forma 1120), due date including extensions | $25,000 per failure, plus $25,000 per 30 days after 90-day notice period |
| 5471 | US person's stake in a foreign corporation | US persons who are officers, directors, or shareholders meeting one of five categories | Attached to the filer's income tax return | $10,000 base, up to $50,000 more in continuation penalties, plus foreign tax credit reduction |
| FBAR (FinCEN 114) | Foreign financial account report | US persons whose foreign accounts exceed $10,000 aggregate at any point in the year | April 15, automatic extension to October 15; filed with FinCEN, not the IRS | Civil penalties starting around $10,000 per non-willful violation, far higher if willful |
| 8938 | FATCA foreign asset statement | Specified individuals over asset thresholds | Attached to the income tax return | $10,000, up to $50,000 more on continued failure |
Now the detail, starting with the form that generates the most startup casualties.
Form 5472: The $25,000 Trap
Form 5472 exists so the IRS can see transactions between US entities and their foreign owners. Two kinds of reporting corporations must file it: a US corporation that is 25 percent or more foreign-owned, and a foreign corporation engaged in a US trade or business. Since 2017, the net also covers a category that catches founders constantly: a US disregarded entity, typically a single-member LLC, wholly owned by a foreign person.
The 25 percent test
A corporation is 25 percent foreign-owned if at least one foreign person owns 25 percent or more of the vote or value of its stock, directly or indirectly, at any time during the tax year. Read that against a typical startup cap table. Two co-founders, one foreign, each at 50 percent: the company is a reporting corporation. A Delaware C-corp that is the wholly owned subsidiary of a foreign parent: reporting corporation. Even post-fundraise, a single foreign founder or foreign fund at 25 percent keeps the company inside the regime.
Being a reporting corporation does not by itself require the form. What triggers the filing is a reportable transaction with a related party during the year.
What counts as a reportable transaction
Broadly: sales, purchases, rents, royalties, loans and their interest, service fees, cost sharing, and similar flows between the reporting corporation and a foreign related party. For startups the common ones are intercompany service agreements (a US entity paying a foreign dev subsidiary, or the reverse), IP licenses, and intercompany loans.
For foreign-owned disregarded LLCs the definition is even wider. The IRS instructions require reporting of amounts paid or received in connection with the formation, dissolution, acquisition, and disposition of the entity, including contributions to and distributions from it. In plain terms: the money the foreign owner put in to fund the LLC is itself a reportable transaction. Which leads to the rule that surprises everyone.
The no-income-still-file rule
A foreign-owned single-member US LLC has no income tax return of its own; it is disregarded. But for Section 6038A reporting it is treated as a corporation, and it must file Form 5472 attached to a pro forma Form 1120 by that return's due date, including extensions. The pro forma 1120 is nearly empty, just the entity's name, address, and a couple of header items, and for these entities it goes to a dedicated IRS unit in Ogden, Utah by mail or fax rather than through normal e-filing.
So the standard horror story: a founder abroad forms a Wyoming or Delaware LLC for a future US expansion, wires in $5,000 to open a bank account, earns nothing, and files nothing. That capital contribution was a reportable transaction. The missed filing carries a $25,000 penalty, and the entity often misses several years before anyone notices, at $25,000 each.
The penalty mechanics
The penalty is $25,000 for each failure to file Form 5472 when due and in the manner prescribed, and filing late, filing incomplete, or filing incorrectly all count as failures. If the failure continues more than 90 days after the IRS mails notice, an additional $25,000 applies per related party for each 30-day period, or fraction of one, that the failure continues. There is no cap stated on the continuation penalty. Multiply across years and related parties and this becomes the largest single tax risk on many international startups' books, which is absurd given that the form itself takes an afternoon.
If your structure is still on the drawing board, this regime is one more reason entity choice deserves real thought; our business entity selection guide covers the tradeoffs, and for foreign founders the short version is that a Delaware C-corp is usually cleaner than an LLC precisely because pass-through treatment does a foreign owner no favors.
Form 5471: When the Founder Owns the Foreign Company
Form 5472 looks at foreign ownership of US entities. Form 5471 is the mirror: US persons with interests in foreign corporations. It hits founders in two common situations: a founder who is a US citizen or tax resident and owns a company abroad (including the original home-country entity left behind after a Delaware flip), and US startups that open a foreign subsidiary.
The filing categories, briefly. Category 2 covers US officers and directors of a foreign corporation when a US person acquires a 10 percent stake. Category 3 covers US persons who acquire or dispose of stock crossing the 10 percent threshold. Category 4 covers US persons in control, meaning more than 50 percent of vote or value. Category 5 covers US shareholders owning 10 percent or more of a controlled foreign corporation. (Category 1 is a narrower regime tied to Section 965 and rarely relevant to startups.) A US parent with a wholly owned foreign subsidiary is squarely Category 4 and 5; a founder who became a US resident while holding 60 percent of the old home-country company is too.
Form 5471 attaches to the filer's income tax return and follows that return's due date, extensions included. The penalty is $10,000 per foreign corporation per annual accounting period for failure to furnish the required information, with an additional $10,000 per 30-day period beginning 90 days after IRS notification, capped at $50,000 of additional penalty per failure. There is also a subtler cost: a 10 percent reduction of available foreign tax credits, deepening the longer the failure runs. The form itself is genuinely burdensome, with income statements and balance sheets for the foreign entity translated to US accounting concepts, so it is a budget item, not a checkbox.
FBAR and Form 8938: The Founder's Personal Layer
These two obligations belong to individuals (FBAR also applies to entities), and they catch founders who became US tax residents while keeping accounts at home.
FBAR, formally FinCEN Form 114. A US person, which includes citizens, residents, and US entities, must file if the aggregate value of their foreign financial accounts exceeds $10,000 at any time during the calendar year. Note the word aggregate: three accounts of $4,000 each cross the line together. Two features make the FBAR a trap. First, it is not a tax form: it is filed electronically with FinCEN through the BSA E-Filing System, not with the IRS, so a CPA preparing only your tax return can miss it. Second, the deadline is April 15 with an automatic extension to October 15, no request needed. Civil penalties for non-willful violations run up to $10,000 per violation as adjusted annually for inflation (somewhat higher in current dollars), and willful violations escalate to the greater of $100,000 (also inflation-adjusted) or 50 percent of the account balance, with criminal exposure in egregious cases. Signature authority over a startup's foreign account counts too: a US-resident founder who can sign on the foreign subsidiary's bank account generally has an FBAR obligation for it.
Form 8938, the FATCA statement, overlaps FBAR but is filed with your income tax return and has higher thresholds. For US-resident filers the trigger is foreign financial assets over $50,000 on the last day of the year or $75,000 at any time ($100,000 and $150,000 for married filing jointly), with much higher thresholds for taxpayers living abroad. It covers more than bank accounts, including foreign stock held directly, so a US-resident founder's retained shares in a foreign company can be reportable here. The penalty is $10,000, with up to $50,000 more for continued failure after IRS notice. Filing one form does not satisfy the other; many founders file both every year.
When Does a Foreign Founder Personally Owe US Tax?
The forms above are mostly information reporting. The separate question is when a foreign founder owes actual US income tax, and the answer is more forgiving than founders fear.
Merely owning shares in a Delaware C-corp does not make you a US taxpayer. A nonresident founder who stays abroad generally faces US tax only on US-source income: salary for work physically performed in the US, and certain US-source passive income such as dividends, which are typically collected through withholding at 30 percent or a lower treaty rate rather than through a filed return. Income effectively connected with a US trade or business is taxed at regular graduated rates, which matters mainly for founders operating through pass-through entities, one more argument for the C-corp.
What changes everything is presence. Under the substantial presence test you become a US tax resident if you are in the US at least 31 days in the current year and your weighted total reaches 183 days: all days this year, plus one third of last year's days, plus one sixth of the year before. Rough rule: about 122 days a year, every year, gets you there. Certain days are excluded, including days as an exempt individual on F, J, M, or Q student and exchange visas, but those exclusions generally require filing Form 8843. Once you are a US tax resident you are taxed on worldwide income and inherit the whole personal stack above: FBAR, Form 8938, and possibly Form 5471 for the company back home.
One more layer: the states. State tax residency runs on its own rules, days and domicile, not the federal test, and a founder spending long stretches in California or New York can create state filing obligations on a separate track. The company side has a state layer too, covered in the Delaware C-corp guide.
Getting an EIN Without an SSN
Every US entity needs an EIN for banking, payroll, and filings, and foreign founders routinely stall here because the online application requires the responsible party to have an SSN or ITIN. The blocked path is only the online one. No SSN or ITIN is needed for the EIN itself.
International applicants use Form SS-4 through three channels: by phone at 267-941-1099 (not toll-free), 6 a.m. to 11 p.m. Eastern, Monday through Friday, which can issue the EIN during the call; by fax, which the IRS serves through dedicated fax lines for domestic and international senders; or by mail to Internal Revenue Service, Attn: EIN International Operation, Cincinnati, OH 45999, the slowest route. Do not pay a service hundreds of dollars for this, and do not let a bank convince you an ITIN is a prerequisite. Get the EIN first; whether the founder ever needs an ITIN is a separate, later question that depends on personal US filing obligations.
The Filing Calendar
For a calendar-year startup, the international items slot into the year like this:
| Deadline | Filing |
|---|---|
| April 15 | Form 5472 with Form 1120, or with pro forma 1120 for a foreign-owned LLC (Form 7004 extends to October 15); Form 5471 and Form 8938 with the filer's return; FBAR due, auto-extends |
| October 15 | Extended deadline for all of the above, including the FBAR's automatic extension |
The pattern to internalize: nearly everything rides the income tax return's due date, including extensions, so a routine Form 7004 or personal extension also buys time for 5472 and 5471. The FBAR extends by itself. For the full domestic calendar these sit inside, see the 2026 startup tax deadline guide, and for individual terms, the glossary.
If You Have Already Missed Filings
Discovering a missed 5472 or three years of unfiled FBARs is bad; panicking into silence is worse. The regime has established relief paths, described here qualitatively because eligibility is fact-specific.
Reasonable cause. These penalties can be abated where the failure arose despite ordinary business care and prudence. Reliance on a professional, first-year foreign status, and prompt correction all help; ignorance of the rule alone usually does not.
Delinquent international information return procedures. Taxpayers who are not under IRS examination and have not been contacted about the missing returns can file the delinquent forms, generally attached to an amended return, with a reasonable cause statement. The IRS may still assess first and consider the statement on response, so the statement needs to be built to survive scrutiny.
Streamlined filing compliance procedures. For individuals whose broader noncompliance, unreported income plus information returns, was non-willful, the streamlined procedures offer a defined route back with reduced or, for those meeting a foreign residency test, no offshore penalty.
Choosing among these is exactly the moment to bring in a cross-border specialist, before anything is filed, because the paths are mutually exclusive in practice and the first submission sets your posture.
The Checklist
- Cap table check: does any foreign person hold 25 percent or more? If yes, Form 5472 discipline starts now.
- Foreign-owned LLC anywhere in the structure? Calendar the pro forma 1120 plus 5472 even if the entity is dormant, and remember contributions count as transactions.
- Foreign subsidiary or a retained home-country company with a US-person founder? Scope Form 5471 and budget for its preparation.
- Every US-resident founder: list foreign accounts each January, test the $10,000 aggregate, and calendar the FBAR separately from the tax return since it is a FinCEN filing.
- Test Form 8938 thresholds annually alongside the FBAR; they overlap but do not substitute.
- Founders approaching US residency: count days under the substantial presence test before the 183-day math counts you, and get advice before the move year, when elections and timing still matter.
- Get the EIN by phone or fax with Form SS-4; no SSN required.
- Put intercompany agreements in writing before money moves between related entities, since every flow is a reportable transaction someone must reconstruct at filing time.
None of this is exotic once it is on a calendar with an owner. That is the job we do for international clients at StartupCFO as part of our tax and compliance service: tracking the 5472s, 5471s, and founder-level filings alongside the domestic stack so nothing surfaces for the first time in diligence.
A closing caution stronger than the usual boilerplate: this article is general information, not tax advice, and cross-border tax is one domain where the generic answer is routinely wrong for the specific founder. Treaty positions, residency timing, exit tax exposure, and penalty relief strategy all turn on facts no article can see. Before your first international filing year closes, engage a CPA who does cross-border work as a specialty, not a sideline. Against penalties that start at $25,000, that fee is the cheapest insurance in this whole guide.
