1. Electing to be treated as a C corporation
If a newly formed business (e.g. a single-member LLC) wants to elect to be treated as a C corporation, the Form 8832 needs to be filed within 75 days of its formation date to make the election effective from the date of the business’s inception.
2. Controlled Foreign Corporation (CFC) rules:
- If a U.S. domestic corporation has more than 50% ownership in that foreign company, that foreign company is called a CFC – controlled foreign corporation. Income earned by a CFC may be subject to US taxation.
- Unless, the CFC has U.S. source income, the CFC itself doesn’t necessarily have to file anything.
- The U.S. parent corporation needs to file a Form 5471 for each CFC along with its U.S. corporate income tax return regardless.
- If you don’t file this form 5471, there is a $10,000 penalty for not doing so.
In general, CFC income is deferred from U.S. tax until it is repatriated. However, the Subpart F and global intangible low-taxed income (GILTI) anti-deferral regimes often subject foreign corporation income to current U.S. taxation. Some of CFC’s income would be captured as taxable income that is subject to U.S. taxes.
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