Who is a 25% foreign shareholder on Form 5472

A 25% foreign shareholder owns, directly or indirectly, at least 25% of vote or value. That is the corporation test. A foreign-owned U.S. disregarded entity is a different test: a domestic DE wholly owned by a foreign person. Form 5472 is generally required after a reportable transaction with a related party. The live Instructions for Form 5472 are Rev. December 2024. The PDF carries the same revision. Product scope is in trycherry.ai/llms-full.txt.

The 25% test is vote or value

The instructions’ purpose sentence: «Use Form 5472 to provide information required under sections 6038A and 6038C when reportable transactions occur during the tax year of a reporting corporation with a foreign or domestic related party.»

A reporting corporation is «A 25% foreign-owned U.S. corporation (including a foreign-owned U.S. disregarded entity (DE)), or» «A foreign corporation engaged in a trade or business within the United States.»

«A corporation is 25% foreign owned if it has at least one direct or indirect 25% foreign shareholder at any time during the tax year.»

A 25% foreign shareholder: «a foreign person (defined later) is a 25% foreign shareholder if the person owns, directly or indirectly, at least 25% of either: The total voting power of all classes of stock entitled to vote, or The total value of all classes of stock of the corporation.»

A foreign-owned U.S. DE is wholly owned

A foreign-owned U.S. DE is not that percentage test. The instructions say: «A foreign-owned U.S. DE is a domestic DE that is wholly owned by a foreign person.» It is «treated as an entity separate from its owner and classified as a corporation for the limited purposes of the requirements under section 6038A that apply to 25% foreign-owned domestic corporations.» Those tax years are «beginning on or after January 1, 2017, and ending on or after December 13, 2017.» The instructions cite T.D. 9796.

A single-member Delaware LLC with a foreign individual owner and no Form 8832 is a FODE if it is wholly owned. It is not “25% foreign-owned” as a membership fraction. The package and the $25,000 math stay on Form 5472 for a foreign-owned Delaware LLC. The pro-forma Form 1120 is the FODE wrapper.

Who counts as a foreign person

The instructions list five categories. «An individual who is not a citizen or resident of the United States.» «An individual who is a citizen or resident of a U.S. possession who is not otherwise a citizen or resident of the United States.» «Any partnership, association, company, or corporation that is not created or organized in the United States.» «Any foreign estate or foreign trust described in section 7701(a)(31).» «Any foreign government (or agency or instrumentality thereof) to the extent that the foreign government is engaged in the conduct of a commercial activity, as defined in section 892.»

There is one exception: the term «does not include any individual for whom an election under section 6013(g) or (h) (relating to an election to file a joint return) is in effect.»

Owner identity forms are a different stack. See W-8BEN vs W-8BEN-E. Paying a foreign contractor is 1099-NEC for foreign contractors. Neither form rewrites the 25% test.

Direct, ultimate indirect, and section 318

A direct 25% foreign shareholder «owns directly at least 25% of the stock of the reporting corporation by vote or value.»

An ultimate indirect 25% foreign shareholder is «a 25% foreign shareholder whose ownership of stock of the reporting corporation is not attributed (under the principles of sections 958(a)(1) and (2)) to any other 25% foreign shareholder. See Rev. Proc. 91-55, 1991-2 C.B. 784.»

Constructive ownership is not raw section 318. «The constructive ownership rules of section 318 apply with the following modifications… Substitute “10%” for “50%” in section 318(a)(2)(C). Do not apply sections 318(a)(3)(A), (B), and (C), so as to consider a U.S. person as owning stock that is owned by a foreign person.»

24% of vote and 24% of value is not “at least 25%” under that definition. That person is not a 25% foreign shareholder on those facts. Do not turn that into a free-standing “never file” rule. Related-party status can still come from the four bullets below.

A related party is four IRS bullets

The instructions define a related party as:

• «Any direct or indirect 25% foreign shareholder of the reporting corporation,»
• «Any person who is related (within the meaning of section 267(b) or 707(b)(1)) to the reporting corporation,»
• «Any person who is related (within the meaning of section 267(b) or 707(b)(1)) to a 25% foreign shareholder of the reporting corporation, or»
• «Any other person who is related to the reporting corporation within the meaning of section 482 and the related regulations.»

Carve-out: «“Related party” does not include any corporation filing a consolidated federal income tax return with the reporting corporation.»

Part II: «Only 25% foreign-owned U.S. corporations, including foreign-owned U.S. DEs, complete Part II. For a foreign-owned U.S. DE, report the information for the foreign owner on the lines provided for the 25% foreign shareholder.»

Part III: «All filers must complete Part III even if the related party has been identified in Part II as a 25% foreign shareholder.» And: «File a separate Form 5472 for each foreign or U.S. person who is a related party with which the reporting corporation had a reportable transaction.»

The filing trigger is a reportable transaction with a related party

«Generally, a reporting corporation must file Form 5472 if it had a reportable transaction with a foreign or domestic related party.»

The instructions state this exception: «It had no reportable transactions of the types listed in Parts IV and VI of the form and, in the case of a reporting corporation that is a foreign-owned U.S. DE, also had no reportable transactions of the type listed in Part V of the form.» That is the IRS sentence. The list of those types stays on the overview post. This page does not rebuild it.

The instructions: «A penalty of $25,000 will be assessed on any reporting corporation that fails to file Form 5472 when due and in the manner prescribed.» And: «If the failure continues for more than 90 days after notification by the IRS, an additional penalty of $25,000 will apply… for each 30-day period (or part of a 30-day period) during which the failure continues after the 90-day period ends.» And: «Filing a substantially incomplete Form 5472 constitutes a failure to file Form 5472.» The table and the stacking examples live on Form 5472 for a foreign-owned Delaware LLC. Keep the bookkeeping cadence so Parts IV–VI have a trail.

After Form 8832 line 6a the entity is no longer a DE

Electing Form 8832 line 6a ends disregarded income-tax status. The entity is then a corporation for income tax. Form 5472 can still apply as a 25% foreign-owned U.S. corporation. The FODE “wholly owned” sentence no longer describes it. The vote-or-value 25% test does. The package moves from a pro-forma 1120 to 5472 on a real 1120. Cherry does not file Form 8832. See trycherry.ai/llms-full.txt.

A domestic LLC with at least two members «is classified as a partnership for federal income tax purposes unless it files Form 8832», per the IRS LLC classification page (reviewed 22-Aug-2026). That page is a one-line pointer. It is not a Form 1065 guide. A 50/50 two-member LLC is not a FODE: FODE is wholly owned.

Information Gain (12 September 2026)

Opinion (not a Cherry statistic). The sentence founders Google — “25% foreign owner triggers 5472” — is the C-Corp test. The default Cherry ICP entity (single-member Delaware LLC, foreign individual owner, no 8832 election) is a foreign-owned U.S. DE: the live instructions require the DE to be wholly owned by a foreign person. Treating those as one sentence is what makes a two-member LLC look like “still a 5472 DE” when the instructions have already moved that fact pattern to partnership classification + a different return. Cherry’s job is to keep the tests on separate lines, not to publish a filing count.

The six-step playbook

1. Name the entity class: U.S. corporation, foreign corporation with a U.S. trade or business, or domestic DE.
2. Apply the matching test. Corporation: at least 25% vote or value, direct or indirect, at any time in the year. DE: wholly owned by a foreign person.
3. Run the five-category foreign-person list. Apply the 6013(g)/(h) exception if it exists.
4. Map related parties with the four IRS bullets. Exclude a consolidated-return affiliate. File one Form 5472 per related party.
5. File if there was a reportable transaction of the types in Parts IV and VI — and Part V if you are a FODE. Get the EIN first: SS-4 for foreign founders.
6. If you checked 8832 line 6a, stop calling the entity a DE. Keep 5472 if you are 25% foreign-owned. Change the wrapper.

FAQ

Does 24% ownership make someone a 25% foreign shareholder?

No. The instructions require at least 25% of vote or of value, directly or indirectly. 24% of both is below that definition.

Does a 50/50 two-member LLC file Form 5472 as a foreign-owned U.S. DE?

No. A FODE is a domestic DE wholly owned by a foreign person. A domestic LLC with at least two members is classified as a partnership unless it files Form 8832.

Do I still need an EIN for the 5472 package?

Yes. The FODE package and the corporate 5472 both need the entity EIN. Apply on Form SS-4.

Does Form 8832 turn off Form 5472?

No. Line 6a ends DE status. A 25% foreign-owned corporation still files 5472. Only the wrapper changes. See Form 8832 line 6a.