Does my foreign-owned LLC have to file if it made no money?
Very likely. A single-member limited liability company owned by a non-US person is normally ignored for US income tax, which is exactly why this return exists: it brings that entity into the reporting system on its own account. What it reports is dealings between the entity and its related foreign parties, and money the owner puts in or takes out is such a dealing. So an entity that earned nothing but received funding from its owner, or had its bills paid by the owner, has something to report. Trading is not the test. The test is whether anything moved between the entity and the people connected to it.
What counts as a reportable transaction with a related party?
More than sales. The form asks about amounts paid and received across the ordinary categories, including sales of goods, services, rents, royalties, interest and commissions, and it also reaches movements that never touch a profit and loss account: money lent either way, amounts left outstanding, capital put in, and amounts distributed out. It is that second group that gets missed, because bookkeeping treats them as balance sheet entries rather than as transactions. The working rule when preparing the return is to read the intercompany account and the owner's own bank records, not just the sales ledger.
My LLC has no income and no tax number, do I still file?
Yes, and the practical consequence is that the entity has to be identified before it can file, so obtaining a US tax number becomes the first task rather than an optional one. The entity is otherwise invisible to the US income tax system, which means the return it files exists largely to carry this form, there being no income to report on it. Clients often discover this years in, having been told at formation that a disregarded entity with no US income has no filings. The obligation is not about income, and an absence of income is not a reason the form was not due.
How is this different from reporting that I own a foreign company?
Direction and subject. This return looks outward from a US entity at its dealings with related parties abroad: the entity is American, the counterparties are not, and what gets reported is the traffic between them. The returns that deal with owning a company outside the United States look the other way, describing the foreign company itself, its ownership, its balance sheet and its earnings. One is about transactions, the other about an entity. A group with a US subsidiary and a foreign parent can easily sit inside both systems at once, filing in each direction for the same year.
Do loans between me and my US company need to be reported?
Yes, and so do the balances they leave behind. Money lent by the owner to the entity, money taken back out, amounts left outstanding at the year end, and amounts on which no interest was charged are all dealings between related parties, and the form asks about them whether or not they appear in the accounts as income or expense. Describing a transfer as a loan does not remove it, and nor does the absence of a written agreement. If anything, an undocumented balance between the entity and its foreign owner is the item most likely to attract a question later.
What is the penalty for filing this form late?
There is one, it is charged per form and per year, and it does not depend on the entity having owed any tax, which is the combination that makes this a serious matter for a dormant entity holding a single property. Continuing failure after a formal request can increase the exposure further. Two things follow from that. Never treat a year with no activity as a year with no filing. And where several years are missing, establish the whole picture and a route for bringing them in before filing the first one, because filing one year alone raises the question of the others.
What is a PFIC, and why do Canadian mutual funds cause trouble for US persons?
A passive foreign investment company is a non-US company that is mostly passive by income or by assets — which describes almost every Canadian mutual fund and ETF. For a US owner the default regime taxes distributions and gains punitively with an interest charge for the years the value built up. Two elections fix it, and both need annual information the fund may not produce for you. Holding the same exposure through US-domiciled funds usually avoids the problem entirely. See PFICs and Canadian mutual funds.
What is a double tax treaty and what does it actually do?
It is an agreement between two countries that divides up the right to tax. Article by article it decides which country taxes employment income, dividends, interest, royalties, pensions, property and business profits — and where both may tax, it caps what the source country can withhold and tells the other to give credit. It also breaks residence ties and opens a government-to-government channel for disputes. What it never does is apply itself: a treaty position is claimed. See our treaty work.
