Do You Really Need an Annual Compliance Service for Your LLC?

Owners often hear “annual compliance” and picture a single renewal fee. In reality it is a stack of separate obligations from different governments, and only some of them are handled by the company that formed your LLC. The state piece keeps your LLC in good standing; the federal piece keeps you out of a five-figure IRS penalty. They are not the same filing and are rarely sold together.

For the full picture of what recurs each year, see our US LLC annual compliance guide for foreign owners.

The trigger is a reportable transaction, not income. Forming and capitalizing the LLC moves money from the foreign owner to the entity, and that contribution is itself reportable. So the common belief that a dormant or pre-revenue LLC has “nothing to file” is wrong for the federal information return. The rule treating these disregarded entities as corporations for Form 5472 purposes has applied since 2017 (T.D. 9796).

We break the “do I even qualify” question down further in our annual compliance checklist for foreign LLC owners.

This is the single reason annual compliance is worth taking seriously. Most information returns have modest penalties; Form 5472 does not. Because there is no statute of limitations on an unfiled information return, a year you skipped in 2021 can still be assessed today. And because the penalty is per form per year, a few missed years compound into six figures quickly.

The full rule, including how the 90-day clock works, is on our Form 5472 penalty page.

DIY is legal and free, and a careful owner with simple facts can absolutely do it. The honest math is about risk, not capability. There is no software wizard that catches your mistakes, no e-file acceptance receipt, and no second set of eyes. You complete the pro forma 1120, attach Form 5472, and send it by one of only two accepted methods before the deadline.

When DIY makes sense

If you have one simple transaction, comfort with US tax forms, and time to verify every line, DIY can work. If English-language IRS instructions are a struggle, your facts are messy, or you are catching up on prior years, the $25,000 downside makes a specialist the cheaper choice. We lay out the trade-offs honestly in our CPA-prepared vs DIY comparison.

“Annual compliance” in a formation company’s upsell often means the state annual report and a registered-agent renewal — real obligations, but not the one with the $25,000 penalty. The federal information return is a tax filing, and most formation services are not tax preparers. The fix is simple: ask, in writing, “Does your plan prepare and file my pro forma 1120 and Form 5472 with the IRS?” If the answer is vague, assume no.

We explain why bundling your formation service and your tax filer is a bad idea in why your formation service should not be your tax filer. For a clean breakdown of what a flat fee covers, see the pricing page.

Think of the fee as insurance against a specific, well-defined loss. The penalty is fixed at $25,000 and the service is a small fraction of it, so the break-even is not close — you would have to be confident in a flawless, on-time DIY filing every single year to come out ahead. Add the value of your own time and the stress of mailing IRS forms from abroad, and the decision gets easier.

If your facts are simple and you enjoy paperwork, DIY is reasonable. If not, start on the apply page and let a specialist handle it.

Earlier guidance had many foreign owners bracing for an annual BOI filing. The March 2025 interim final rule narrowed the requirement: a company formed in a US state is no longer a reporting company, so a typical foreign-owned US LLC does not file BOI at all. Only entities formed abroad and registered to do business in the US fall in scope now.

Do not let that relief blur the picture: BOI and Form 5472 are different rules from different agencies. The IRS Form 5472 obligation is untouched and still due by April 15 each year. We keep the moving parts straight in our 2026 annual checklist.