If you’re a non-U.S. person owning a Single-Member LLC (SMLLC) in Texas, you have two compliance fronts: IRS reporting under Form 5472 and Texas Franchise Tax requirements. Missing either can lead to steep penalties or business forfeiture. Here’s what every foreign owner needs to know in 2025.
What is a Foreign-Owned SMLLC?
A foreign-owned SMLLC is a U.S. LLC with one owner who is not a U.S. person under IRC §7701. This includes:
- Non-resident individuals
- Foreign corporations
- Foreign trusts
The LLC is treated as a disregarded entity for federal tax unless an election is made to be taxed as a corporation.
IRS Reporting Requirements: Form 5472
Under IRC §6038A and Treas. Reg. §1.6038A-1, foreign-owned SMLLCs must file:
- Pro Forma Form 1120 (not a real corporate return)
- Form 5472 to report “reportable transactions” with the foreign owner or related parties
Reportable transactions include:
- Capital contributions
- Loans or advances
- Service payments
- Reimbursements
- Asset transfers
Penalty for Non-Compliance:
A $25,000 penalty per year applies for failure to file or incomplete filing, per IRC §6038A(d).
Texas Franchise Tax for SMLLCs
Texas treats foreign-owned SMLLCs the same as any domestic LLC for state tax purposes. Key requirements:
- Must file annually even if no revenue is earned
- May owe $0 tax if revenue is under the $2.47 million threshold in 2025
- Must file:
- Form 05-163 (EZ Computation) or
- Form 05-102 (Public Information Report) and
- Form 05-158-A (Long Form) if revenue exceeds threshold
Failure to file may result in forfeiture of the right to do business in Texas.
Example: Indian Founder in Texas
Case:
Ravi, an Indian citizen, owns a SMLLC in Texas that provides online marketing services. In 2024, he:
- Sent $50,000 from his personal account to fund the LLC
- Took back $10,000 to repay himself
- Earned $100,000 in gross receipts from U.S. clients
Federal Filing:
- Must file Form 5472 and pro forma Form 1120
- Must disclose all capital movements and reimbursements
Texas Filing:
- Files Form 05-158-A and Form 05-102
- Owes franchise tax only if gross receipts exceed threshold
Step-by-Step Compliance for 2025
Federal IRS Filing:
- Obtain an EIN for your LLC (must disclose foreign ownership)
- File Form 5472 + Pro Forma 1120 by April 15, 2026 (or extension)
- Maintain detailed records of all transactions with the owner
Texas Filing:
- File Franchise Tax Report by May 15, 2025
- If no revenue, still file “No Tax Due Report”
- File Public Information Report annually
- Use SOSDirect to stay compliant with state records
Conclusion
A Texas SMLLC owned by a foreign person is a great structure for U.S. business entry, but it brings strict IRS and state filing obligations. Missing Form 5472 or the Texas Franchise Tax Report can lead to penalties or even entity forfeiture. Compliance is not optional.
Call to Action
Schedule a consultation with Anshul Goyal, CPA, EA, FCA to ensure your foreign-owned Texas LLC stays compliant with both the IRS and Texas Comptroller. We specialize in cross-border compliance for Indian and global entrepreneurs.
Disclaimer:
Anshul Goyal, CPA, EA, FCA is a U.S.-licensed Certified Public Accountant, Enrolled Agent authorized to represent clients before the IRS, and a cross-border tax expert. This blog is intended for educational purposes only. Foreign-owned SMLLCs are subject to unique IRS reporting under IRC §6038A and must comply with Texas franchise tax laws. Please consult a qualified tax professional to ensure timely and accurate filings.
Top 5 High-Searched FAQs
1. What is a foreign-owned SMLLC?
A U.S. LLC with a single owner who is not a U.S. person.
2. Do I need to file Form 5472 if I have no income?
Yes, if there were reportable transactions like capital contributions or loans.
3. What is the penalty for missing Form 5472?
$25,000 per year per entity for late or incomplete filings.
4. Is Texas franchise tax required if there is no income?
Yes. Even with $0 revenue, a No Tax Due Report must be filed annually.
5. Can I open a U.S. bank account for a foreign-owned LLC?
Yes, but you must have an EIN, company documents, and often a U.S. mailing address.
About Our CPA
Anshul Goyal, CPA, EA, FCA is a U.S.-licensed Certified Public Accountant and IRS-authorized Enrolled Agent with expertise in international and cross-border tax planning. He advises Indian citizens, NRIs, and global founders on IRS compliance, Form 5472, entity structuring, and Texas franchise tax obligations.