For co-founders and partners outside the US
US LLC With Two or More Non-US Owners: Form 1065, K-1s and Partner Withholding
Most guidance for foreign-owned LLCs assumes one owner. Add a second owner and the US rules change: the LLC becomes a partnership for tax, files Form 1065 instead of Form 5472, and may have to withhold tax for its foreign partners. Here is what applies, from the IRS instructions.
Quick answer
What does a US LLC with two or more foreign owners file?
By default it is a partnership (IRS Form 8832 instructions), so it files Form 1065 with a Schedule K-1 for each owner, due March 15 for a calendar year, unless it had no income and no deductions at all (IRS). Form 5472 is for corporations and single-member LLCs, not partnerships. If the LLC has income effectively connected with a US trade or business, it must also withhold tax on the foreign partners' shares and file Forms 8804 and 8805 (IRS).
At a glance
- US tax classification
- Partnership by default (two or more members)
- Yearly return
- Form 1065 with a K-1 for each owner; March 15 for a calendar year
- Late filing penalty
- US$255 per owner per month, up to 12 months
- If there is US business income
- Section 1446 withholding: 37% for individual partners, 21% for corporate partners
- Form 5472
- Not for a partnership; it applies to corporations and single-member LLCs
Why two owners change everything
A US LLC with a single foreign owner is a disregarded entity, and the IRS uses Form 5472 with a pro forma Form 1120 to see its dealings with that owner (IRS). With two or more members, the default classification is a partnership unless the LLC elects to be taxed as a corporation (IRS). A partnership is not a reporting corporation for Form 5472, so the filing moves to Form 1065. The same happens when a single-member LLC takes on a second owner part-way through its life: from then on it is a partnership for tax.
What the LLC files each year
| Filing | When it applies | Due | Source |
|---|---|---|---|
| Form 1065 with Schedule K-1 for each owner | Every year, unless the LLC had no income and no deductions or credits | 15th day of the 3rd month after year end (March 15 for a calendar year) | IRS |
| Form 8813 payments | When the LLC has effectively connected taxable income allocable to foreign partners | During the year, as installments | IRS |
| Form 8804 with a Form 8805 for each foreign partner | Same; copies of Form 8805 go to each foreign partner | With the yearly withholding return | IRS |
| Form 1040-NR (or 1120-F) for each partner | When a partner has effectively connected income through the LLC | On the partner's own deadline | IRS |
| BE-13 | Generally within 45 days of foreign persons setting up a US business | Once | BE-13 guide |
Section 1446 withholding, in plain terms
If the LLC has income effectively connected with a US trade or business, the partnership itself must pay tax on the share allocable to each foreign partner, whether or not it distributes the money. Currently the rate is 37% for partners who are individuals and 21% for corporate partners. The partnership pays through Form 8813, reports the year on Form 8804, and gives each foreign partner a Form 8805, which the partner uses to claim credit on their own US return (IRS).
If the LLC has no effectively connected income, this withholding does not apply. That is often the case for a business run entirely from outside the US with no US office, staff or dependent agent, but it turns on the facts, and a tax treaty can change the answer for partners in treaty countries. See US LLC tax by country.
The penalty that catches partnerships
Filing Form 1065 late costs US$255 for each month or part of a month it is late, up to 12 months, multiplied by the number of partners during the year (IRS). For a two-owner LLC that is a full year late, that is US$6,120 for one year, even when the LLC owes no tax. Late Schedule K-1s have their own penalty.
Common situations
Two co-founders abroad
Both live outside the US and split the LLC 50/50: Form 1065 every year, K-1s to both, and withholding only if there is effectively connected income.
A second owner joins
A single-member LLC that filed Form 5472 becomes a partnership from the date the new owner comes in, so that year may need both views.
Mixed US and foreign owners
The US owner reports their K-1 on their own return; the partnership withholds only on the foreign owners' share of effectively connected income.
Owners who want corporate treatment
An LLC can elect to be taxed as a corporation on Form 8832. It then files Form 1120 and, if 25% foreign-owned, Form 5472. See foreign-owned C corporations.
Law references
- Partnership return: Internal Revenue Code section 6031, referred to in the IRS Form 1065 instructions, which also set the due date and the per-partner late filing penalty.
- Default classification of a multi-member LLC: Treas. Reg. section 301.7701-3 (IRS Form 1065 instructions; Form 8832).
- Withholding on foreign partners' effectively connected income: Code section 1446(a) (IRS partnership withholding page).
- Effectively connected income: Code sections 864 and 871 (IRS Pub 519).
- Form 5472 applies to reporting corporations under Code section 6038A, which a partnership is not (IRS). If a partner lives in a treaty country, the treaty's business profits and permanent establishment articles may matter; see US LLC tax by country for article numbers.
How we help
Gurleen Kaur, CPA licensed in British Columbia and Washington State, prepares Form 1065, the K-1s and, where they apply, Forms 8804 and 8805 and the partners' Form 1040-NR. Every engagement starts with a fixed written quote after we review the ownership and the year's activity. Single-member LLC? See the annual compliance package.
Common questions
Does a multi-member LLC with foreign owners file Form 5472?
Not as a partnership. Form 5472 is filed by 25% foreign-owned US corporations and by foreign-owned single-member LLCs. A multi-member LLC taxed as a partnership files Form 1065 instead, unless it elected to be taxed as a corporation.
When is Form 1065 due?
By the 15th day of the 3rd month after the end of the tax year, which is March 15 for a calendar year.
What is the penalty for filing Form 1065 late?
US$255 for each month or part of a month, up to 12 months, multiplied by the number of partners.
Does the LLC have to withhold tax for foreign partners?
Only on income effectively connected with a US trade or business that is allocable to foreign partners: currently 37% for individuals and 21% for corporations, reported on Forms 8804 and 8805.
Sources
Every rule and figure on this page links to the IRS, CRA or other official source it comes from. Amounts change; we re-check them before each engagement.
- IRS: Instructions for Form 1065
- IRS: Partnership withholding (section 1446)
- IRS: Instructions for Form 5472
- IRS: Instructions for Form 8832
- IRS: Publication 515
Gurleen Kaur, CPA licensed in British Columbia and Washington State. Last updated November 11, 2026. This page is general information, not tax or legal advice for your situation.
Related guides: Single-member LLC compliance, US LLC tax by country, Foreign-owned C corporations.
Request a Quote for your multi-owner LLC
Tell us your situation in a few lines. We confirm whether we can help, what records matter and the next step. Substantive advice begins under a paid diagnostic or signed engagement.
Prepared and signed by a licensed US CPA who can represent you before the IRS. Verify Gurleen Kaur's Washington licence (#41150) on CPAverify