Closing a foreign-owned LLC: the final Form 5472

The state and the IRS close separately

Dissolving the LLC with Wyoming, Delaware or wherever you formed it is a state filing. The IRS has its own list for closing a business, and it starts with filing a final return and ends with closing the IRS business account (IRS, closing a business). The same page reminds you to check your state responsibilities too, because the two don’t talk to each other.

For a single-member LLC owned by someone outside the US, the federal side is the same filing it did every year: a pro forma Form 1120 with Form 5472 attached. The $25,000 penalty for not filing a Form 5472 when due (Form 5472 instructions) applies to the last year as much as to any other.

Tick “final return”

The Form 5472 instructions say the only parts of the pro forma 1120 you fill in are the LLC’s name and address and items B and E on the first page. Item E is the row of boxes for initial return, final return, name change and address change (Form 1120 instructions). On the last one, tick final return. The IRS closing checklist says the same: check the “final return” box near the top of the front page (IRS).

What goes on the last Form 5472

For a foreign-owned LLC, the Form 5472 instructions count as reportable “amounts paid or received in connection with the formation, dissolution, acquisition, and disposition of the entity, including contributions to, and distributions from, the entity.” In plain terms, closing is a transaction with the owner, and it goes on the form. In the final year, that usually means:

• Money you paid into the LLC to settle its last bills, including fees you paid for it from your own card.
• The balance you moved out of the LLC’s bank account to yourself before closing it.
• Anything else the LLC handed back to you, such as equipment or stock.
• The ordinary transactions from earlier in that year, the same as any other year.

Before you close the bank account, download the statements for the whole final year. They are the easiest record of what moved, and after the account closes they can be hard to get.

When the last one is due

In an ordinary year, a foreign-owned LLC uses its owner’s tax year, or the calendar year if the owner has no US filing (Form 5472 instructions), so the date is April 15. The Form 1120 instructions add a rule for corporations: one that has dissolved “must generally file by the 15th day of the 4th month after the date it dissolved.” Which of those governs a disregarded LLC that closes partway through the year is something we check for each file. Filing soon after you close is in time under either rule, and by then the numbers for the last year are all in.

Close the IRS account, last

Once the final return is in, write to the IRS to close the business account. The IRS closing page asks for a letter with:

• The LLC’s full legal name
• Its EIN
• Its business address
• The reason you are closing it
• A copy of the EIN assignment notice, if you kept it

It goes to Internal Revenue Service, Cincinnati, OH 45999. The same page is clear that the IRS “cannot close your business account until you have filed all necessary returns and paid all taxes owed.” So if earlier years are missing, closing the LLC doesn’t make them go away. They have to be filed first, and that is a different job with its own risks. We cover it on the late Form 5472 page.

Keep the records after it’s gone

The LLC closing doesn’t end the need for its papers. The IRS’s general rule is to keep records until the period of limitations for the return runs out, three years in the ordinary case, and indefinitely if a return was never filed (IRS, how long to keep records). Keep copies of every 5472 you filed, the fax or postal confirmations, the final bank statements and the state dissolution papers together, somewhere you’ll still have them in a few years.

A closing checklist

1. 1.Check every past year has its 5472 on file. Fix any gap first.
2. 2.Pay the LLC’s last bills and move the remaining balance out.
3. 3.Download a full year of bank statements, then close the account.
4. 4.Dissolve the LLC with the state.
5. 5.File the final pro forma 1120 and Form 5472, with final return ticked.
6. 6.Send the IRS the letter to close the business account.
7. 7.Keep the whole file.

We prepare and file the final pro forma 1120 and Form 5472 the same way we do the yearly one. Details are on the Form 5472 page.