The 12 Mistakes That Cost Non-Resident LLC Owners Most

Failing to file Form 5472 when due and in the manner prescribed carries a $25,000 penalty.[1]Internal Revenue Service, Instructions for Form 5472 (12/2024)

And then it grows.

If the failure to file Form 5472 continues for more than 90 days after IRS notification, an additional $25,000 penalty applies.[2]Internal Revenue Service, Instructions for Form 5472 (12/2024)

That continuation penalty runs per related party, for each 30-day period or part of one. The base is the floor, not the exposure. Most people who miss this were never told it existed by whoever formed their company.

Your own deposit into the company bank account is a capital contribution and is reportable. So is an expense you paid on a personal card. Founders with no customers in year one frequently file claiming nothing to report and are wrong, which puts them in mistake one.

For Wyoming the consequence is not a fee:

"If the annual report is not filed within sixty (60) days following the due date, the entity will be administratively dissolved."

Wyoming Secretary of State, Business FAQs. Sixty days, and the notice goes to your registered agent rather than to you. You usually find out when a payment processor re-runs its checks and pauses payouts.

Every LLC doing business in California or organized in California owes an $800 annual tax, and it keeps falling due even in a year with no trading, until the LLC is cancelled.[3]California Franchise Tax Board, Limited liability company

That applies whatever state formed your LLC.

A California contractor, inventory in a California warehouse, or registering with the Secretary of State can each do it. Forming in Wyoming does not help, and you now file in two states.

It was, for tax years beginning on or after January 1, 2021 and before January 1, 2024. That window has closed. Guides still advertising it are describing an expired provision, and the tax is due in year one.

Delaware LLC annual tax is due on or before June 1, and late payment carries a $200 penalty plus 1.5% interest per month on tax and penalty.[4]Delaware Division of Corporations, LLC/LP/GP Franchise Tax Instructions

Note that the interest compounds on the penalty as well as on the tax.

Delaware LLC annual tax is due on or before June 1, and late payment carries a $200 penalty plus 1.5% interest per month on tax and penalty.[4]Delaware Division of Corporations, LLC/LP/GP Franchise Tax Instructions

Related: budgeting from Delaware's own tax FAQ page, which is stale. The statute has said otherwise since January 1, 2026, and both figures are quoted on the Delaware page.

Costs months, achieves nothing. The IRS instruction tells a responsible party with no SSN or ITIN what to write on line 7b instead. People lose entire quarters to this.

Two seconds, and it routes you to a verification path you cannot complete. Google Play demands a United States government-issued photo ID from individual accounts and accepts a photo ID issued in any country from an organization's representative. Shopify's residency requirement is scoped to individuals and sole proprietorships. Choose Individual and you fail checks your company would have passed.

Changing it later is sometimes a new account rather than a setting.

Stripe asks for the physical location where the majority of your business activity is carried out. A registered agent's office is not that, and PO boxes are excluded outright. This is the most common cause of rejection for an otherwise eligible registered LLC.

Mercury tests where the founder lives. Relay tests citizenship or residency for every owner. Neither tests the state of formation, so the money spent on the "banking-friendly state" does nothing for the application. If you are on both lists, that spend is pure loss.

There is no status lookup, and silence for two to three weeks is normal. A second copy can be processed as a separate request, producing a duplicate EIN or a manual review, both slower than waiting. Do not refax before four weeks, and call the international line first.

Apple requires a work email on your organization's domain and a publicly available, functional website on a matching domain. Neither is about being foreign. A founder who leaves both until enrollment loses weeks to something that costs very little and a weekend if done in month one.

Nine of the twelve are timing or sequence errors rather than knowledge gaps. The information was available; it arrived after the decision.

That is why the operating sequence matters more than any individual fact on this site. Do the EIN first because everything is blocked behind it. Register the domain in week one because it blocks something six weeks out. Start bookkeeping at the first transaction because reconstructing a year in March is where the begins.

Which of these is most expensive? Form 5472, by a distance. A base penalty, then the same again per related party per 30-day period once the failure continues past the cure window. The figures are on the Form 5472 page.

I formed in Wyoming to avoid state tax. Was that wrong? Not necessarily. It is wrong if you have nexus elsewhere, because you then pay both, and it is wrong if you expected it to solve banking, which it does not.

Has the Delaware tax really changed? Yes. The statute and the franchise tax instructions agree with each other; the tax FAQ on the same state website is out of date. Both are quoted on the Delaware page.

I already made mistake one. What now? File. The continuation penalty is triggered by failure continuing after IRS notification, so acting before any notice is materially better than after.

How do I avoid most of these at once? Follow the sequence rather than the checklist. Most of these are things done in the wrong order rather than things nobody knew.