Business Incorporation
Form 5471, Form 5472, Form 8858, Form W-8BEN-E
Choosing between a UK limited company, a US LLC and a US C corporation, with the tax view each country takes of the entity you pick.
What does Business Incorporation involve?
An entity that is simple in one country can be awkward in the other. A UK limited company owned by an American is a foreign corporation with its own US reporting, and a US LLC owned by someone in the UK may be seen one way by the IRS and another by HMRC. We compare the options on both sets of returns before anything is registered.
Forms and filings involved
- Form 5471
The information return a US citizen or green card holder files for a UK limited company they own, control or have acquired an interest in.
- Form 5472
Reporting for US corporations with a significant foreign owner, and for single-member US LLCs owned by someone outside the US.
- Form 8858
The information return for a foreign entity the IRS disregards, or a foreign branch, such as a UK operation of a US business.
- Form W-8BEN-E
The certificate a non-US entity gives a US payer to confirm its foreign status, FATCA classification and any treaty claim.
Picking an entity both countries can accept
A UK private limited company is formed at Companies House and pays corporation tax on its profits.
For US purposes it is an eligible entity and, by default, a foreign corporation, so a US shareholder who owns or controls it files Form 5471 and may be taxed on some undistributed profits. The default can be changed by an entity classification election on Form 8832, turning the company into a disregarded entity reported on Form 8858, though that election has consequences of its own.
A US LLC is flexible for the IRS. With one owner it is disregarded by default, with several it is a partnership, and it can elect to be taxed as a corporation. HMRC does not simply adopt the IRS's choice. It looks at the entity's own characteristics, and an LLC can be treated differently by HMRC and the IRS. Where the two countries disagree about who earned the profit, credit for tax paid in one may not be available in the other.
A Delaware or other US C corporation pays federal tax on its own profits, and dividends to UK-resident shareholders suffer US withholding, generally 15% on portfolio holdings under the treaty. It is usually the form outside investors expect. A US company whose directors run it from the UK can also be UK resident under the central management and control test, and the treaty's rules for dual-resident companies then need checking. We establish where decisions will actually be taken before the company is formed.
Questions settled before registration
- 01
- US classification of a UK limited company, and whether to elect out
- 02
- HMRC's likely view of a US LLC under its specific operating agreement
- 03
- Where the board meets and whether that creates a second tax residence
- 04
- Formation filings, EIN application and UK corporation tax registration
- 05
- The US reporting each structure triggers, from Form 5471 to Form 5472
Who this is for
Americans in the UK starting a trading company or consultancy
- UK residents forming a US entity to sell into the American market
- Founders raising money from US investors who expect a Delaware corporation
- Freelancers deciding whether to incorporate at all, and where
Why US UK Tax Returns
Each return is prepared with the other country's return open beside it, so a credit, election or disclosure on one is supported by the other.
One File
US and UK returns prepared in the same engagement and reconciled line by line.
Primary Sources
Every position traced to the Code, the treaty, IRS instructions or HMRC guidance.
Scope First
Returns, forms, years and fee agreed in writing before work begins.
The Same People
The team that files this year carries the elections and credits into the next.
Questions we are asked
I am an American freelancer in London. Should I set up a UK limited company?
Possibly, but the US cost needs weighing. A UK company pays corporation tax at rates between 19% and 25% and lets you choose when to draw dividends. For US purposes it is a foreign corporation you control, so Form 5471 is due each year and some retained profits may be taxed to you currently. Some owners elect to treat the company as disregarded instead. The better answer depends on profit levels and what you draw.
Will HMRC treat my US LLC the same way the IRS does?
Not necessarily. The IRS classifies an LLC under default rules or by election, while HMRC considers the entity's own features, such as whether profits belong to the members as they arise under the operating agreement. The two authorities can reach different conclusions about the same LLC. Where they do, a UK-resident member may find that US tax on profits and UK tax on distributions do not line up for credit. The documents should be reviewed first.
I live in the UK. Can I form a US company to sell to American customers?
Yes. A US LLC or corporation can be owned by someone living anywhere, and formation is a state filing followed by an application for an employer identification number. The tax result depends on the choice. A corporation pays US tax on its own profits. A single-member LLC files Form 5472 with a pro forma Form 1120, and which country taxes its profits, and when, depends on where the work is done and how HMRC views it.
Primary sources
What this page says is drawn from the official material below. Read it yourself; we would rather be checked than trusted.
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