Bookkeeping for Foreign-Owned US Companies

For a US company owned by a non-resident, standard bookkeeping is not enough. The IRS has a special set of rules designed to monitor the flow of money between a US entity and its foreign owners. The most important of these is the requirement to file Form 5472, which details all "reportable transactions" between the two parties.

This means your bookkeeping system must not only track income and expenses, but must specifically identify every transaction that involves the foreign owner. This includes:

• Initial and subsequent capital contributions from the owner.
• Loans made to or from the owner.
• Payments for services rendered by the owner.
• Reimbursements for expenses paid by the owner on behalf of the company.

The penalty for failing to file an accurate Form 5472 is a staggering **$25,000**. This makes proper bookkeeping a critical risk management function for any foreign-owned US company. Without a meticulous record of all related-party transactions, accurately preparing this form is impossible.

YourLegal's bookkeeping service is built with the needs of non-resident founders in mind. Our process includes:

• **Specific Chart of Accounts:** We set up specific equity and loan accounts to track all funds flowing to and from the foreign owners.
• **Transaction Tagging:** Our bookkeepers are trained to identify and tag all related-party transactions for easy reporting at year-end.
• **Audit-Proof Records:** We ensure that every transaction is supported by documentation, creating a defensible record in case of an IRS inquiry.

By outsourcing your bookkeeping to us, you ensure that your company is compliant with these complex international requirements from day one, protecting you from severe penalties and giving you peace of mind.