Can an LLC owned by another LLC be a disregarded entity for tax filing purposes?

Yes, an LLC that's 100% owned by another entity can generally be treated as a disregarded entity, but the international element adds some complexity here. When a single-member LLC is owned by a foreign partnership, it can technically be treated as a disregarded entity for US federal tax purposes. However, the foreign partnership itself would be considered engaged in US business through that disregarded LLC, which means the foreign partnership would need to file a US partnership return (Form 1065) and potentially pay US taxes on income effectively connected with a US trade or business. There's also the issue of withholding requirements that apply to foreign-owned entities with US income. Even with the disregarded entity election, there are specific reporting requirements you'll need to address.

Just wanted to share my experience here. I had a somewhat similar setup and was completely lost with all the filing requirements. After hours of trying to figure it out and getting nowhere, I used this AI-powered tax service called taxr.ai that helped make sense of everything. You just upload documents or explain your situation and it explains exactly what forms you need and why. For my foreign-owned LLC structure, it identified some specific reporting requirements I had no idea about, including that Form 8858 for disregarded entities. Might be worth checking out at https://taxr.ai if you're still confused about how to properly structure everything. It saved me a ton of research time and probably some penalties too!

I finally tried taxr.ai after seeing it mentioned here. I was super skeptical at first because my situation with a UK-based parent company owning a US LLC seemed too complex for an automated service. But I was impressed! It immediately identified that my single-member LLC was automatically disregarded (no election needed) but flagged that I still needed to file Form 8858 (Information Return for disregarded entities) and explained the withholding tax considerations. It even caught that we needed to get an EIN for the disregarded entity even though it doesn't file separate returns. Definitely worth checking out if you're dealing with this kind of structure.

If you're having trouble getting definitive answers about your tax situation, you might want to try Claimyr. I was in a similar position with an international business structure and really needed to speak directly with the IRS. After spending days trying to get through on my own and just getting disconnected, I used https://claimyr.com to get me in the IRS phone queue and they called me when an agent was ready. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c Their service bypasses the endless hold times and I actually got to speak with an IRS international tax specialist who confirmed exactly how my foreign-owned LLC needed to be reported. Sometimes you just need to hear it directly from the source to be 100% confident.

I need to eat my words. After seeing Claimyr mentioned here, I decided to give it a shot as a last resort for my foreign entity tax questions. I had wasted so much time trying to reach the IRS directly with no luck. Using Claimyr, I got a call back in about an hour and spoke with an IRS agent who specialized in international business structures. He confirmed that our UK-owned LLC could indeed be treated as a disregarded entity, but walked me through the specific forms needed (8858, 5472, and W-8BEN-E) and withholding requirements that still applied. Honestly shocked this service actually worked after all my failed attempts to get through on my own!

There's one important thing nobody's mentioned yet - if the UK partnership is treated as a partnership for US tax purposes and the LLC is disregarded, the foreign partners might need to file individual US tax returns (1040-NR) if they're considered engaged in US trade or business through the disregarded LLC. Plus, the partnership itself needs to withhold tax on the foreign partners' share of effectively connected income (ECI). Don't overlook this part!

Just to add another option - have you considered checking if your situation qualifies for relief under the US-UK tax treaty? Depending on your specific activities, you might be able to claim treaty benefits that could eliminate some filing requirements or reduce taxes. The concepts of "permanent establishment" in the treaty could be relevant here.

This is a really complex situation that I've been dealing with myself. One thing I'd strongly recommend is making sure you understand the timing requirements for some of these filings. Form 8858 for disregarded entities has to be filed by the due date of the owner's return (including extensions), and if you miss it, there are automatic penalties that can be pretty steep - $10,000 per form per year. Also, don't forget about state-level implications. Even if your LLC is disregarded for federal purposes, some states might still require separate filings or have different rules for foreign-owned entities. You'll want to check the specific requirements in whatever state your LLC is formed in. The withholding requirements mentioned by others are crucial too - if you have effectively connected income and don't properly withhold on your foreign partners' shares, you could be looking at penalties on top of the taxes owed. It might be worth getting professional help given all the moving pieces here.