Distribution

A distribution is the mirror image of a capital contribution: value flowing from the company to its owner. When you transfer $2,000 from your LLC's US bank account to your personal account in Portugal, that is a distribution. So is using the company debit card for personal shopping, or having the company pay your personal rent. The label does not depend on what you call it; it depends on who ended up with the money.

For Form 5472, distributions get their own line, just like contributions. A foreign-owned single-member LLC reports the total amount distributed to its foreign owner during the year on the form attached to its pro forma Form 1120, due April 15. The report is informational, so a distribution does not automatically create US tax, but leaving it off the form can make the filing substantially incomplete and expose the company to the $25,000 penalty.

Distributions are not wages. If the company pays you for actual work, that is a payment for services, which is a different category of reportable transaction and may have its own tax consequences. A clean example: Lena in Austria owns a US LLC that earned $30,000. She takes out $12,000 during the year without invoicing for work. That $12,000 is a distribution, reported in its own box on Form 5472.

Multi-member LLCs handle distributions through Form 1065 and Schedule K-1, due March 15 for a calendar-year partnership. Each partner's share of profit and each cash distribution shows up on their K-1, and partnerships with US business income generally must withhold tax on foreign partners under section 1446, at rates that can reach up to 37% of the partner's share. Whatever the structure, record the date and amount of every payout as it happens; that simple log is most of the work of an accurate filing, and it protects you if the IRS ever asks questions years later.