Form 1040-NR or Form 1120-F Filing
When your foreign-owned LLC has US trade or business income, your owner type controls the return: Form 1040-NR for nonresident individual owners, Form 1120-F for foreign corporations, or a planning-only filing-path review for other owner structures. Form 5472 may still be separately required.
What is Effectively Connected Income?
ECI Defined
Effectively Connected Income (ECI) is income earned by a foreign person that is connected to a US trade or business (USTB). A USTB exists when activity in the United States is "considerable, continuous, and regular" — there is no bright-line test, and the determination is based on facts and circumstances.
How ECI is Taxed
ECI is taxed on a net basis — meaning deductions are allowed against gross income — at graduated rates. For foreign individuals, rates go up to 37%. For foreign corporations, the rate is a flat 21%, plus a potential 30% branch profits tax on after-tax earnings.
ECI vs. FDAP Income
ECI is fundamentally different from FDAP (Fixed, Determinable, Annual, Periodic) income. FDAP is taxed at a flat 30% on the gross amount with no deductions allowed. ECI is taxed on a net basis at graduated rates — often resulting in a lower effective tax rate because you can deduct business expenses.
Form 5472 Still Required
Even if your LLC has ECI and you file Form 1040-NR or 1120-F, you still need to file Form 5472 with a pro forma Form 1120 for any reportable transactions between the LLC and its foreign owner. ECI filing does not replace the Form 5472 requirement.
Common ECI Triggers
These activities typically create a US trade or business, making your income effectively connected.
US Employees or Contractors
Having employees or contractors performing services in the United States on behalf of your LLC.
Physical Office or Warehouse
Maintaining a fixed place of business in the US — an office, warehouse, retail location, or other physical presence.
US-Based Fulfillment
Selling inventory with fulfillment, logistics, or warehousing operations based in the United States.
US Real Property Rental
Receiving rental income from US real property. This is treated as ECI (or can be elected as such under IRC Section 871(d)).
Services Performed in the US
The LLC owner or agents regularly performing services in the US — consulting, management, or other professional activities.
What’s Not Usually ECI
Stock & Securities Trading
Trading stocks, securities, or commodities through a US broker generally does not create a US trade or business, thanks to the "trading safe harbor" under IRC Section 864(b)(2).
Purely Foreign Operations
If all of your LLC’s business activity takes place outside the United States with no US nexus — no US employees, no US office, no US customers being served from the US — you likely don’t have ECI.
Passive Investment Income
Dividends, interest, and other passive investment income is generally classified as FDAP income (taxed at 30% gross), not ECI — unless it is effectively connected to a USTB.
What’s Included in Your 1040-NR / 1120-F Filing Path
Everything you need to understand, calculate, and file your effectively connected income.
ECI Determination Report
Guided assessment of whether your LLC has a US trade or business (USTB), with documentation of all triggering factors and a summary of your USTB status.
Tax Calculation Worksheet
Estimate your net ECI after deductions, determine your applicable tax rate (graduated for individuals, flat 21% for corporations), and calculate your total tax liability.
Form 1040-NR Package Path (Individual Owners)
Step-by-step guidance for completing your nonresident alien income tax return, including which schedules to file, how to report ECI, and where to claim deductions.
Form 1120-F Package Path (Corporate Owners)
Guidance for foreign corporations with a US branch or ECI, including branch profits tax considerations, treaty-based rate reductions, and Form 8833 disclosure requirements.
Withholding & Estimated Tax
Calculate quarterly estimated tax payments (Form 1040-ES-NR), understand NRA withholding obligations, and avoid underpayment penalties.
CPA-Ready Export
All of your ECI determination data, tax calculations, and form preparation details packaged in a clean format for easy handoff if you choose to work with a tax professional.
How It Works
Pick Your Return Path
Tell us whether you file as a nonresident individual (Form 1040-NR) or a foreign corporation (Form 1120-F). This is your own income-tax return, not an add-on — though Form 5472 may still be separately required for reportable owner transactions.
Answer ECI-Specific Questions
We determine your USTB status, identify all sources of ECI, calculate your tax liability, and determine which forms you need to file.
Get the Package for Your Selected Return Path
Receive your tax calculation worksheets, form preparation guides, filing instructions, and estimated tax payment schedule — all ready to use.
ECI Tax Rate Reference
| Owner Type | ECI Tax Rate | Additional Taxes |
|---|---|---|
| Foreign Individual | 10% – 37% (graduated) | Possible self-employment tax |
| Foreign Corporation | 21% flat | 30% branch profits tax (may be reduced by treaty) |
Key Deadlines
Form 1040-NR
April 15 (or June 15 if no US wages/office). Extension via Form 4868.
Form 1120-F
April 15 (with US office) or June 15 (no US office). Extension via Form 7004.
Estimated Tax Payments
April 15, June 15, September 15, January 15 of the following year.
Form 5472
Due with pro forma 1120 — April 15, extension via Form 7004.
Important Warnings
Form 1120-F must be filed timely for deductions to be allowed against ECI. If you miss the deadline (including extensions), you may lose the right to claim deductions entirely.
Failure to file can result in the IRS assessing tax on GROSS income with no deductions. This means you could owe tax on your entire revenue, not just your profit. The consequences of late or non-filing are severe.
Treaty-based positions require Form 8833 disclosure. If you rely on a tax treaty to reduce your US tax liability, you must file Form 8833 to disclose the treaty-based return position. Failure to disclose can result in a $1,000 penalty per failure.
Compare the Cost
CPA for 1040-NR / 1120-F ECI Filing
- Professional preparation
- Personalized tax advice
- Hard to find CPAs who know NRA tax
- Multi-week turnaround typical
ForeignLLCTax 1040-NR / 1120-F Filing Path
- ECI determination + tax calculation
- Form 1040-NR or 1120-F guidance
- Estimated tax payment schedule
- CPA-ready export included
Frequently Asked Questions
Ready to choose your 1040-NR / 1120-F filing path?
Answer the owner-type and income questions first; the wizard then prepares the Form 1040-NR path, the Form 1120-F path, or a planning-only review if your structure needs professional analysis.