When a foreign investor is on your cap table, the paperwork doesn’t stop at the wire

What was broken

A SaaS company had received foreign investment in an earlier round but had missed key cross-border reporting obligations — the filings tied to the inflow of funds and allotment of shares to the overseas investor were incomplete. The lapses risked penalties and would complicate the company’s next round.

What we did

CapEasy reviewed the foreign-investment transactions against the applicable reporting requirements, prepared the pending reporting and allotment filings, and regularised the reporting position with the relevant regulatory framework. We documented the position so it would hold up in future diligence.

Where it landed

The company regularised its cross-border reporting on the earlier foreign investment, removing a compliance overhang ahead of its next round. Its cross-border filings were brought fully up to date.

The registry founders think they still owe is gone — a different one isn’t

Most US founders who took foreign investment in the last two years have some memory of the Corporate Transparency Act’s beneficial-ownership registry — and the memory is now out of date in the direction of less filing. FinCEN’s March 2025 interim final rule narrowed "reporting company" to cover only entities formed under foreign law that register to do business in the US; on August 11, 2026 FinCEN made that exemption permanent. A US-formed corporation or LLC is not a reporting company under the current rule regardless of who owns it, and does not file Beneficial Ownership Information — full stop, not case-by-case.

That relief does not touch a separate, older regime: Form 5472, filed with the IRS under Internal Revenue Code sections 6038A and 6038C. Where BOI asked "who owns you," Form 5472 asks "what did you transact with the people who own you" — and a US company that is 25%-or-more foreign-owned, or a US single-member LLC wholly owned by a foreign person, owes it every year the ownership and transactions persist. Conflating the two regimes — assuming the BOI exemption closed the whole foreign-ownership reporting question — is the exact kind of gap this engagement had to unwind after the fact.

What Form 5472 actually asks for, and who it catches

Two structures trigger it. A domestic corporation where a single foreign person owns 25% or more of the stock (by vote or value) is a "reporting corporation" the moment it has a reportable transaction with that related party — a capital contribution, a loan, a management fee, an expense reimbursement. And a domestic disregarded entity (typically a single-member LLC) wholly owned by a foreign person is treated as a corporation for this purpose alone: it has to file even though it files no income tax return of its own, attaching Form 5472 to a pro forma Form 1120 that carries only the entity’s name, address, and identifying information — no income statement.

The foreign-owned disregarded entity is the structure diligence and legal counsel miss most often, because the LLC otherwise looks invisible for tax purposes. It cannot e-file this return; it needs its own EIN and a dedicated mailing address, and the return is due by the corporate deadline including extensions. A capital contribution from the foreign parent — the same event a similar cross-border filing would flag on the other side of the wire — is itself a reportable transaction that has to appear on the form.

The penalty is per-return, not per-mistake, and it compounds

A reporting corporation that fails to file Form 5472 when due, or fails to maintain the records section 6038A requires to substantiate the reported transactions, faces a $25,000 penalty — and if the failure continues more than 90 days after IRS notice, an additional $25,000 applies for each 30-day period beyond that, with no stated ceiling. Because the obligation runs per related party per year, a foreign-owned entity that missed several years of filings is looking at that penalty stacked across every year, not one bill for "being behind."

The record-keeping half is the part that survives a clean filing: section 6038A requires the entity to keep records sufficient to establish the accuracy of the return, and to produce them on IRS request — the same discipline as reconciling an inflow against a regulator’s framework rather than filing and hoping the numbers hold up if asked.

What transfers from the engagement

The method that closed the gap in this engagement generalises directly: don’t patch forward from today, reconcile every historical transaction against what the rulebook required at the time it happened, and produce a documented position rather than a corrected filing with no paper behind it. For a US entity with foreign ownership, that means walking every capital contribution, loan, and related-party transaction since the foreign investment landed, confirming which years triggered a Form 5472 obligation, and filing — or refiling with a reasonable-cause statement — with records attached, not just numbers.

CapEasy’s part in that work is the reconstruction: the transaction ledger, the ownership-threshold check year by year, and the Form 5472 data assembled and reconciled to the books. The return itself, any reasonable-cause penalty abatement request, and anything else filed with the IRS runs through the partner CPA firms we work with across 15 US states.