Form 5472 vs 1120: Simple Guide for Indian Founders of U.S. LLCs

If you’re an Indian founder running a U.S.-based LLC, you’ll come across Form 5472 and Form 1120, two essential IRS filings required for foreign-owned companies. The IRS requires these forms to track foreign-owned companies doing business in the United States. In this blog, we will dive into what each of these forms is all about, how they’re linked, and what Indian founders should keep in mind when filing them. 

What Is Form 5472?

Form 5472 is an IRS tax form used to report financial transactions between a foreign owner (like you) and their U.S.-based LLC. It ensures transparency in cross-border dealings. It’s how the IRS tracks international business relationships and the movement of funds.

For example, if you send ₹5,00,000 (approx. $6,000) from your Indian account to your U.S. LLC for startup expenses, that capital contribution must be disclosed in Form 5472.

What Is Form 1120?

Form 1120 is the U.S. corporate tax return used to report income and expenses. For Indian founders of single-member LLCs, it’s typically filed as a pro forma attachment to Form 5472, even if the LLC has no income. However, in your case, as a foreign owner of a single-member LLC, it’s not used to pay taxes; instead, it serves as a required cover page when filing Form 5472.

Example:

Form 5472 is the message, and Form 1120 is the cover that shows who it’s from. The IRS needs both to understand and accept it.

Who Should File Form 5472 and Form 1120?

If all the below apply, you’re required to file both Form 5472 and Form 1120 each year:

• You are an Indian citizen or resident and the sole owner of a U.S.-based LLC.
• Your LLC is 100% foreign-owned and treated as a disregarded entity for U.S. tax purposes. Have you had any reportable transactions (e.g., loans, capital contributions, service payments) between yourself and the LLC?

What Information Goes Into Form 1120 (Pro Forma)?

 

Legal Business Information

Form 1120 requires your company’s legal name, U.S. business address, and Employer Identification Number (EIN).

Note: If you’re filing Form 1120 as a pro forma attachment to Form 5472 (for foreign-owned single-member LLCs), only basic details like name, address, and EIN are needed. The sections below apply to full filings (e.g for C-Corps).

Financial Summary

You need to report the total income your business earned during the tax year.

Business Expenses

Include all deductible expenses such as salaries, rent, utilities, and business-related costs.

Taxable Income and Tax Due

Calculate your taxable income after deducting expenses and report the total federal tax owed.

Other Required Details

Form 1120 may also ask for information about shareholders, officers, and any tax credits or deductions being claimed.

What Does Form 5472 Include?

Foreign Owner Information

The form requests the full legal name of the foreign owner, their tax residency address, and the percentage of ownership they hold in the U.S. business.

U.S. Company Details

You need to provide the legal name of the LLC or corporation, its U.S. business address, and its Employer Identification Number (EIN).

Reportable Transactions

Form 5472 lists all financial transactions between the foreign owner and the U.S. company. This includes loans, repayments, payments for services, capital contributions, or transfers of goods and money.

Nature of the Relationship

It also requires a clear description of the relationship between the foreign owner and the company, whether they are the owner, lender, or service provider.

Filing Requirement with Form 1120

Even if the company has no income during the year, Form 5472 must be submitted as an attachment to Form 1120.

Why Form 1120 Is Attached to Form 5472

 

 

The IRS won’t accept Form 5472 alone because it needs basic information about the U.S. business that is filing it. Form 5472 should be attached to Form 1120, which serves as a cover sheet with the formal name, Employer Identification Number (EIN), and address of the company.

To ensure that Form 5472 is linked to the correct legal business entity in their system.  Without Form 1120, the tax return is incomplete, which could result in fines. 

Penalties for Form 5472

• $25,000 Minimum Penalty

 If you fail to file Form 5472 on time or submit an incomplete/incorrect form, the IRS imposes a $25,000 fine.

• Additional $25,000

If the issue isn’t fixed within 90 days of the IRS notice, an additional $25,000 penalty may apply.

Penalties for Form 1120

Late Filing Penalty

If Form 1120 is filed after the due date (without an approved extension), the IRS charges 5% of the unpaid tax per month, up to a maximum of 25% of the total unpaid tax.

Minimum Penalty for Incomplete or Late Filing (60+ days late)

If your business owes tax and files 60 or more days late, the minimum penalty is $435 or 100% of the tax due (whichever is less).

Need Help with Form 5472 and Form 1120?

Schedule a free consultation with Ledgers today.

At LedgersCFO, we specialize in helping Indian founders of U.S. LLCs stay compliant with IRS filing requirements. We understand that figuring out Form 5472 and Form 1120 can feel overwhelming, especially when you’re managing your business from overseas.

Many founders struggle with questions like:

• What exactly needs to be reported?
• Which documents should I collect?
• How do I avoid IRS penalties?

Even a small mistake or missing attachment can trigger serious issues with the IRS.

That’s where we come in. Our team simplifies the entire process, from start to finish:

• Gathering the correct and complete information
• Accurately preparing Form 5472 and the pro forma Form 1120
• Reviewing all details to prevent costly errors

While you focus on growing your business, we make sure your filings are correct and on time.
Schedule your free consultation now.