Client is a non-resident alien residing in a country that has a tax treaty with the US. She has ownership (either whole or partial -- I haven't gotten a response yet) in a fairly successful company there ("ABC Ltd") that sells and rents widgets worldwide.
During 2018, they decided to establish a sub in the US ("ABC America LLC") to facilitate sales and rentals to US based customers.
I get to review the operating agreement and formation docs 5 months after first talking to her, and it turns out she personally is the sole member of the LLC and not the foreign corp. No activity at all for 2018 for the US LLC and client wasn't in the US for a single day.
Easy peazy, no 5472 and 1120 proforma required, no 1040NR or 1040 for her (assuming she has no other US activity). No filing obligations for 2018.
What has me concerned is that she's holding the US LLC (which is currently disregarded) directly instead of through the foreign corp. I feel like the ownership should be through the foreign corp so that:
(1) initial losses may be able to be used to offset foreign corp income per the tax treaty if there's no 'permanent establishment' in the US. In that case a no-tax-due 1120-F would be filed with an 8833 attached.
(2) if there is permanent establishment, and the US LLC eventually swings to profit, the net income would be taxed at 21% instead of bracketed individual rates.
(3) if foreign country treats US LLCs as corporations, which I've spent time researching but still isn't clear, tax credits can be brought into parity by electing C Corp status for the US LLC.
(4) complications on contributions/distributions could be avoided.
Am I missing something here?