Owning a business outside of the U.S. can be an exciting endeavor for many U.S. citizens. There are dozens of ways to make money, network, and expand your business father than imaginable. Whether you’re opening a foreign LLC, managing a branch, or simple investing in a foreign company — working abroad can provide amazing experiences. However, it’s important to understand how it will impact your US taxes. Let’s go over the main differences of Form 5471 vs. Form 8858.
What Are These Forms?
Form 5471 is used to report information about foreign corporations that you own or control.
Form 8858 is used to report information about foreign disregarded entities (FDEs) and foreign branches (FBs) — business abroad that are treated as extensions of you, not a separate corporation.
Which IRS Form to File Based on Your Type of Foreign Business
- When to File Form 5471
You should file this form if:
- You own 10% or more of a foreign business
- You are an officer, director, or shareholder with significant ownership or control
- The foreign business is treated as it’s own company for U.S. tax purposes
Examples:
Owning shares in a French business that’s classified as a corporation.
Being a US shareholder in a UK limited company.
- When to File Form 8858
You should file this form if:
- You own 100% of a foreign disregarded entity (equivalent to a U.S. LLC)
- You operate a foreign branch of your US business
- You operate your business as an extension of you (not a separate entity)
Examples:
Running a French office as an extension of your US business.
Owning a single-member LLC in Mexico.
Why Does This Matter?
The IRS takes strict measures to ensure business owners are properly documenting their business. Filing these forms keeps track of your foreign income and ownership in the business. It’s very important to make sure you know what to file because failure to do so results in penalties starting at $10,000 per form, per year. Additionally, by filing these forms it allows you to properly report income and claim any foreign tax credits you might be entitled to.
Summary Table: Which Form to File?
| Your Investment Type | How the IRS Views It | Form to File |
| Foreign corporation (10%+ ownership) | Separate entity | Form 5471 |
| Foreign disregarded entity (100% owned) | Not separate, owned by you | Form 8858 |
| Foreign branch of U.S. business | Extension of your U.S. company | Form 8858 |
Not sure which form you need to file? It’s a good idea to check in with a tax professional. They can help you figure out how your business is set up and which form fits your situation. Investing in a business overseas can be a great move, but
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