What happens if I have not filed Form 5471 for my company?
The years do not go away and the exposure is not measured by tax. Charges on this kind of filing are worked out by reference to the form and the delay rather than to what was owing, so a company that made modest profits can still leave a meaningful position behind. The order of work matters: establish which years the ownership or control test was met, get the company's books into a state where the schedules can be completed, and record why the returns were missed before the first one is submitted.
Does the penalty apply if the foreign company made no profit?
It can. This is an information return about the corporation, so what is missing is the return rather than a payment, and the exposure attaches to the form and the delay. A loss-making or dormant year is still a year the return was due. The lack of profit is worth documenting, because it forms part of explaining the delay and shows that nothing was deferred by it, but it is not a reason the filing was not required. Owners of small companies are the group this surprises most often.
Do I have to catch up every year at once?
Each year is its own return, built on that year's ownership position and that year's figures, so a catch-up is a sequence rather than a single filing. That is useful, because the oldest year can be settled first and every year after it inherits the same restated opening figures. It also means the scope has to be fixed at the start: a year in which the ownership or control test was not met is not part of the exercise at all, and including it creates a filing nobody needed.
How far back do the missing Form 5471 filings go?
Back to the first year the test was met, which is a question about facts rather than a standard period. Ownership and control can begin when a company is incorporated, when shares change hands, when an office is taken, or when the person becomes a US person, and any of those dates can fall later than the company's own history suggests. So the catch-up starts with a dated ownership record built from the incorporation documents and the share transfers. That record sets the scope and is the first thing a reviewer asks for.
Does the exposure grow the longer I leave the filings?
Delay is one of the two things the charge is measured against, the other being the form itself, so time works against you here in a way it would not if the amount turned on tax owing. That said, submitting quickly and badly creates its own problem. A return built on figures that have not been restated properly is a filing you may have to revisit, and the reason for the original delay is easier to evidence early, while the records and the people involved are still available.
Do I need the foreign company's old accounts to file late returns?
Yes, and this usually governs the timetable. The schedules need the corporation's income statement, balance sheet and earnings restated to US principles for each year, which means the underlying books rather than the signed local accounts. For older years that can mean recovering ledgers from a previous bookkeeper or an accountant no longer engaged. Start that request before anything else, because the reporting work cannot begin without it and it is the step least under your control.
Do I need to report a foreign business I own?
Almost certainly, and on more than one form. Canada requires reporting of foreign affiliates on the T1134; the United States has a family of returns keyed to the entity type and your level of control, and several carry penalties that apply whether or not any tax is owed. These are information returns, so the obligation follows the ownership rather than the profit. See T1134.
Why should a Canadian rarely own a US LLC?
Because the two systems classify it differently. The United States generally treats a single-member LLC as transparent while Canada treats it as a corporation, so the income is taxed in different hands in each country and the foreign tax credit does not line up. The result is tax paid twice with no relief to claim. Other structures reach the same commercial outcome without the mismatch. See why a Canadian should rarely own an LLC.
