Running a Software Agency Through a US LLC? You Still Need Form 5472

I get this question from a specific type of client a lot. You're a developer, designer, or agency owner living outside the US. You formed a Delaware or Wyoming LLC to bill US clients, maybe pay contractors, maybe just look more credible to enterprise customers who want a US entity on the contract. No employees. No office. Sometimes not even any clients yet.

Doesn't matter. If you're a foreign owner of that LLC, you almost certainly need to file Form 5472.

It's About Your Entity, Not Your Industry

The IRS doesn't care whether you write code, design logos, or run IT support. What matters is how your LLC is structured. If you formed a single-member LLC and you're the foreign owner, that's a disregarded entity — and disregarded entities owned by foreign persons file Form 5472 every year, period.

If you set up a Delaware C-Corp instead, you file Form 1120 annually, and if 25% or more of it is foreign-owned, Form 5472 comes with it.

If your agency is a multi-member LLC taxed as a partnership, Form 5472 usually doesn't apply — you're filing Form 1065 instead. That's the one carve-out worth knowing.

The Zero-Revenue Trap

This is where agency owners get caught off guard. You formed the LLC six months ago. No clients signed yet. You think there's nothing to report.

Wrong. Every dollar you moved into that LLC counts. Wired $20,000 to cover a contractor's invoice before you landed your first client? Reportable. Paid your registered agent fee out of your personal account? Reportable. Funded the LLC's bank account to keep it active while you built your pipeline? Reportable.

These go in Part V of Form 5472 for disregarded entities. The IRS wants to see the money movement between you and the LLC regardless of whether the business made a cent.

What Actually Counts as a Transaction for an Agency

For a typical software or creative agency, here's what shows up on Form 5472:

• Capital you put in to cover developer salaries or contractor invoices
• Software subscriptions or tools paid on the LLC's behalf
• Any distributions you took back out
• Hosting or infrastructure costs you personally fronted
• Loans between you and the LLC — yes, even informal ones

If any single category totals $50,000 or less, you can use simplified reporting instead of listing exact figures.

Track It as You Go

Agencies move money constantly — retainers coming in, contractors getting paid out, tools getting subscribed to. Don't try to reconstruct a year of transactions in April. A simple Excel sheet with date, amount, and direction of the transfer is enough. Update it monthly and filing takes twenty minutes instead of a weekend.

Deadlines Don't Change Because You're Small

Due April 15 for calendar-year entities, same as everyone else. Need more time? File Form 7004 before the deadline and you get until October 15.

The pro forma Form 1120 attached to your filing needs a wet-ink signature — no e-signatures, no e-filing. Mail or fax it.

Contractors and Related Parties

If your co-founder, spouse, or another entity you control has any financial dealings with the LLC, check whether they count as a related party. The ownership thresholds that trigger this catch more people than expected — a business partner who owns even a small stake can pull other transactions into scope.

Don't Wait for a Client to "Justify" Filing

I've had agency owners tell me they'll deal with Form 5472 once the business is actually generating revenue. That's backwards. The filing requirement exists the moment you have a reportable transaction — and forming the LLC itself, or funding it, is usually enough to trigger that. Waiting just means you're accumulating years of unfiled returns with a $25,000 penalty attached to each one, and the statute of limitations doesn't start running until you actually file.

If You Formed Through Stripe Atlas or Doola

Same story as everyone else who used a formation platform to get their agency's LLC off the ground — they don't tell you about Form 5472 as part of the onboarding. You find out later, usually from a Reddit thread or a blog post like this one.

File It Yourself, for Free

You don't need to hire a $1,500 CPA to handle this if your agency's transactions are straightforward. MyFreeTaxAmerica.com walks you through the whole filing — generates the pro forma Form 1120, checks your entries for errors, no cost. If you want a professional set of eyes on it before it goes to the IRS, our Premium Package adds a full review plus IRS e-fax submission. Check our FAQ if you're not sure whether your setup qualifies.

Running a lean agency shouldn't mean skipping IRS compliance because you're "not big enough yet." The penalty doesn't scale down for small teams.

General information, not tax advice. Entity structure and filing obligations depend on your specific setup — talk to a qualified tax professional if you're unsure.