Form 5472: the $25,000 filing for foreign-owned startups

Form 5472 is the information return a US corporation files when a foreign person owns at least 25% of it and the company had a reportable transaction with a related party during the year, such as a loan from the founder or payments to a foreign subsidiary. It is attached to Form 1120 and due on the same day, April 15, 2027 for a 2026 calendar year, and the penalty for not filing it is $25,000.

Many YC companies meet the ownership test on day one, because a founder who is not a US citizen or resident holds more than 25% of a Delaware C corporation. This guide covers who files, which transactions count, the due date, a worked example, the penalty and the version for single-member LLCs. The rules are in the Instructions for Form 5472 and on Form 5472 itself.

Who has to file Form 5472

A US corporation files Form 5472 when it is 25% foreign owned and had a reportable transaction with a related party. It is 25% foreign owned if, at any time during the tax year, one foreign person owned at least 25% of its voting power or of the value of its stock, directly or indirectly.

A foreign person, for these purposes, includes an individual who is not a US citizen or resident and any company organized outside the United States. Ownership is tested by vote or by value, and indirect ownership counts: the instructions apply the constructive ownership rules of section 318, with modifications. A founder who holds their shares through a holding company abroad is still a 25% foreign shareholder.

"At any time during the tax year" matters for startups whose ownership moves. A foreign founder diluted from 30% to 20% in a priced round still made the company 25% foreign owned for that year.

The question reaches you on the corporate return before it reaches you anywhere else. Question 7 of Schedule K on Form 1120 asks whether a foreign person owned at least 25% of the corporation, and the Instructions for Form 1120 say a company that answers yes may have to file Form 5472.

What counts as a reportable transaction

A reportable transaction is any of the money transactions listed in Part IV of the form, plus non-cash or below-value transactions described in Part VI, between the company and a related party. Related parties include the 25% foreign shareholder, the company's own subsidiaries, and other people related to either under the tax code.

Part IV lists what a startup typically has: amounts borrowed from and loaned to the related party (lines 17 and 31), interest paid and received, payments for technical, managerial, engineering or similar services (lines 15 and 29), rents, royalties and sales of property. Line 22 totals what the company received and line 36 totals what it paid.

Three details from the instructions shape the numbers:

• Accrued, not just paid. A company on the accrual method reports accrued payments and receipts, so an invoice the subsidiary sent in December counts in that year even if it is paid in January.
• Small amounts. An amount of $50,000 or less may be reported as "$50,000 or less" rather than exactly.
• Estimates. When the actual amount cannot be determined, a reasonable estimate is one between 75% and 125% of it.

If the company had no reportable transactions of the kinds in Parts IV and VI, a 25% foreign-owned corporation does not file the form, even though it still answers yes on Schedule K.

When is Form 5472 due

Form 5472 is attached to the corporation's income tax return and is due by that return's due date, including extensions. For a calendar-year C corporation, Form 1120 is due the 15th day of the fourth month after year end: April 15, 2027 for the 2026 tax year, or October 15, 2027 with an extension on Form 7004.

The Instructions for Form 7004 set the automatic extension at generally six months. Form 5472 has no due date of its own: it rides with the return, so an extended Form 1120 extends it too, and a late Form 1120 makes it late as well. The timeline for the return itself is in our guide to the Form 1120 due date.

The company files a separate Form 5472 for each related party it had reportable transactions with, and line 1g of each form states how many it is filing in total. A C corporation that e-files Form 1120 includes them with the electronic return; only the single-member LLC version, below, has to go by fax or mail.

A worked example: one founder, one subsidiary

A Delaware C corporation on a calendar year has two founders. One, who lives outside the United States, owns 60%; the other, a US citizen, owns 40%. The company also owns 100% of a foreign subsidiary that employs its engineers. In 2026 it has two related parties with reportable transactions, and so up to two Forms 5472.

The 2026 transactions and where each goes:

Both of the founder's amounts are under $50,000, so the instructions allow each to be reported as "$50,000 or less". The subsidiary's $240,000 is reported in full.

The subsidiary's form may not be needed. One exception in the instructions applies when a US person that controls the foreign related corporation files Form 5471 for it and lists every transaction with the reporting corporation on Schedule M of that Form 5471. Here the US parent controls its subsidiary, so if its Form 5471 carries the $240,000 on Schedule M, the company files one Form 5472, for the founder, and line 1g reads 1. Without that Schedule M, it files two.

Because the company keeps its books on accrual, the $2,000 of interest counts for 2026 even if it is paid in 2027, which is one reason accrual books make this form easier: the accrued amounts are already in the ledger.

What is the Form 5472 penalty

The penalty for failing to file Form 5472 when due, or in the manner prescribed, is $25,000, and filing a substantially incomplete form counts as not filing. If the failure continues more than 90 days after the IRS notifies the company, another $25,000 applies for each related party for each 30-day period, or part of one, that it continues.

For one related party, that adds up quickly:

The $25,000 penalty also applies to a failure to keep the records required by Regulations section 1.6038A-3: books sufficient to show that related party transactions were treated correctly on the return. The instructions point to special rules for small corporations and for related party transactions of de minimis value.

The penalty is not tied to tax owed, so a startup with a loss and no income tax due is exposed in the same way. If a form was missed in an earlier year, talk to a tax adviser before filing it.

Foreign-owned single-member LLCs

A US single-member LLC wholly owned by a foreign person is normally disregarded for income tax, but for Form 5472 it is treated as a corporation. It files a pro forma Form 1120 with Form 5472 attached by the Form 1120 due date, and it cannot file electronically.

For these entities the instructions add rules that do not apply to a C corporation:

• Only the name and address and items B and E on the first page of the pro forma Form 1120 are completed, with "Foreign-owned U.S. DE" written across the top.
• The forms go by fax or by mail to a dedicated IRS address listed in the instructions, not the usual Form 1120 address.
• Part V of Form 5472 covers formation, contributions to and distributions from the LLC, so money the owner puts in or takes out is reportable.
• The Schedule M exception for Form 5471 filers does not apply.

Most venture-backed startups are C corporations, but founders sometimes hold an earlier LLC or a US holding company, and each needs its own check.

What to do this month

Form 5472 is a short form with a large penalty, and the work is mostly knowing your cap table and your related party transactions before the return is prepared. A startup with a foreign founder should treat it as part of every year-end close.

1. Check the cap table for any foreign person with 25% or more of vote or value at any point this year, counting shares held through companies.
2. List every related party: the foreign shareholder, your subsidiaries and anyone related to either.
3. Book every transaction with them in its own account, including loans, interest and intercompany service fees, on the accrual method.
4. If you have a foreign subsidiary, ask your preparer whether Schedule M of Form 5471 will cover its transactions.
5. Calendar April 15, 2027, and file Form 7004 by then if the return will be extended.
6. Keep the loan agreements, intercompany invoices and the year's related party schedule with the return.

LedgerIt keeps a startup's books on accrual and closes each month, with loans from founders and intercompany charges in accounts of their own, so the totals Form 5472 asks for are already in the ledger at year end.