# Question about reporting my UK private limited company for US taxes



## AmInUK

Hello,

I'm an individual living in the UK. I've been here for over three years and each year I have filed my US taxes (I never owed, because I make below the FEIE threshold and pay taxes on my income in the UK). Each year I have also filed my FBAR.

For my individual tax purposes, in the UK I am a sole proprietor. I'm a contractor who invoices people and they pay me in full and then I pay Class 2 and Class 4 tax at the end of the year.

But in 2014 my friend and I got together and formed a UK private limited company. We both live in the UK. I am a US citizen and he is a Spanish citizen. I own 50% of the company and my business partner owns the other 50%. In 2014 our company made no money. We operated at a huge loss (about £75,000). The reason for this huge loss is because we are a tech startup making a hardware product and the first few years of these types of companies you have nothing to sell and all your money is going into R&D to develop the product.

My question is this year when I file my personal US taxes for 2014, is there anywhere I need to mark that I own this company? It is a company based solely in the UK and, again, we are currently operating at a loss. Additionally I take no salary, dividends, or payments from the company of any kind (this will hopefully change in 2016 once we start selling our product). The company of course has a business bank account, which I am a signatory on, but I already report this bank account on my FBAR.

But for now, since I take no income of any kind from this company, do I need to list it anywhere on my US income tax return that I file as an individual for my sole proprietorship/contract work I do? And if so, is this easy to do in Turbo Tax (which I have used to file my US taxes for the last three years without a problem)?

Very best,
John


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## DavidMcKeegan

Well it is actually a bit more complicated than you would think, and at a minimum, I would recommend having an expat accountant help you with this first year filing.

UK Private Ltd companies are considered corporations by IRS standards. As a result, you will be required to file a Form 5471 to report the activity of the company. 

If you you would prefer to stay away from the Form 5471, you could file a Form 8832 and elect to treat this as a foreign partnership. However even at that, you would still have a filing separate from your 1040 in the form of a Form 8865. This would allow all income to be passed through in the year earned, rather than retained within the corporation. 

I will mention (in my opinion) that given the big loss in the first few years, it might be best to continue with a Form 5471. 

Good luck!


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## Bevdeforges

For a slightly alternative point of view, you may want to take a look at the instructions for form 8832, which includes a list of the types of business entities the IRS considers as "corporations." For the UK, the only one listed is "Public Limited Company." If I understand correctly, there are two types of limited company in the UK - private and public and apparently only the public limited companies are considered to be "corporations."
Cheers,
Bev


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## liquiduty

Here's a related thread I started - http://www.expatforum.com/expats/expat-tax/641993-us-taxes-uk-limited-company-us-citizen.html

I'm not sure that you can consider your company as a foreign disregarded entity because it has more than one owner.


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