A Foreign-Owned U.S. LLC Selling Only into Latin America on Mercado Libre: What Does It File in the U.S.?

A U.S. LLC owned by one foreign person, with no election to be taxed as a corporation, that uses Mercado Libre to ship goods from China to Latin American buyers and has no U.S. warehouse, employee or agent generally earns income that is neither U.S.-source nor effectively connected, so the foreign owner generally owes no U.S. income tax. But the LLC is a foreign-owned disregarded entity and must file a pro forma Form 1120 and Form 5472 by April 15 every year, with a $25,000 starting penalty per missed form. Stock in a U.S. warehouse or U.S. activity changes the analysis.

The typical setup

A Chinese seller formed a Wyoming or Delaware LLC, owns 100% of it, obtained an EIN and joined Mercado Libre Global Selling with it. For U.S. sellers, Mercado Libre's validation asks for an EIN, a U.S. principal business address and the contact person's ID, and a non-resident contact provides a W-8. Goods ship from Shenzhen to Mexico and Brazil, payouts arrive in dollars in an e-wallet or bank account in the LLC's name, and money goes back to China.

Three questions follow: what the LLC is for tax purposes, whether U.S. income tax applies, and what has to be filed every year.

What the LLC is for tax purposes

Under Treas. Reg. §301.7701-3, a single-owner LLC that hasn't filed Form 8832 is a disregarded entity by default. It doesn't exist separately for income tax, and its income belongs to the foreign owner. For information reporting only, the rules treat a foreign-owned disregarded entity as a U.S. corporation that files a pro forma 1120 with Form 5472; that 1120 is a cover sheet, not a tax computation.

W-9 or W-8: under the W-9 instructions, when a disregarded entity's owner is foreign, the owner gives a W-8 and the LLC doesn't give a W-9 in its own name. An individual owner uses W-8BEN, an entity owner W-8BEN-E. Mercado Libre's validation guide also asks non-residents for a W-8, unlike Walmart, which only offers U.S. entities a W-9 route.

Does U.S. income tax apply?

A foreign person owes U.S. income tax mainly in two cases: income effectively connected with a U.S. trade or business (ECI), or certain fixed U.S.-source income such as interest, dividends and rents. Selling goods falls under the first.

Goods in China sold to Latin American buyers: for purchased inventory, source generally follows where title passes; for goods you produce, it follows where production happens. Goods handed to a carrier in China and delivered to buyers in Latin America generally pass title outside the U.S. With no U.S. office, no employees and no agent signing contracts for the LLC, there is generally no U.S. trade or business.

Treaty protection for China residents: under the U.S.–China income tax treaty, business profits are taxable in the U.S. only if attributable to a U.S. permanent establishment. A registered agent's address or a mail-only U.S. address generally isn't one.

Bottom line: on those facts the foreign owner generally has no U.S. federal income tax and no Form 1040-NR. But the conclusion rests entirely on the facts, and when they change, so does the answer.

When to look again

Using Mercado Libre's U.S. Full warehouse: U.S. sellers can send stock to a U.S. warehouse Mercado Libre designates, which then exports each order. With inventory stored in and exported from the U.S., where title passes and whether there is a U.S. business need real analysis, and the warehouse state's income or franchise tax comes into play.

People in the U.S.: U.S. employees, an agent who negotiates and signs for you, or a U.S. office can put you in a U.S. trade or business.

Also selling on U.S. platforms: if the same LLC sells to U.S. customers on Amazon or Walmart, the U.S. part is likely ECI, and the Latin American part has to be looked at alongside it.

In those cases a foreign individual files a timely Form 1040-NR (with an ITIN) and a foreign corporation files Form 1120-F, with a protective return where the answer is unclear. Nonresident aliens generally need to file within 16 months of the due date, and foreign corporations within 18 months, to keep their deductions.

What Form 5472 reports, and the penalty

The pro forma 1120 and Form 5472 are due April 15 each year, extendable six months on Form 7004. The pro forma 1120 can't be e-filed; it goes by fax or mail.

Form 5472 reports transactions between the LLC and its foreign owner (and other foreign related parties). For a disregarded entity the net is wide: the owner's startup capital and money for inventory, expenses the owner pays for the LLC (formation fees, platform fees), payouts the LLC sends to the owner, and loans and repayments, all reported by amount. Mercado Libre's dollar payouts landing in the LLC's account and then going back to China are classic reportable transactions.

The penalty: $25,000 per missed or incomplete form, plus $25,000 for each 30 days the failure continues more than 90 days after an IRS notice. It doesn't depend on income, which is why no U.S. income, nothing to file is the costliest mistake.

Records to keep: the LLC must keep books and records that support Form 5472. The simplest approach is a separate payout account for the LLC, documentation for every transfer between owner and LLC, and monthly downloads of platform settlement detail.

State filings and other reports

State annual report: the LLC files its formation state's annual report and fee each year; Wyoming's is due in the anniversary month. Missing it leads to administrative dissolution, which can get platform and bank accounts frozen.

BOI: under FinCEN's 2026 final rule, companies formed in the U.S. no longer file beneficial ownership reports.

China: how a China tax resident reports foreign business income earned through a U.S. LLC is a question for a Chinese tax adviser.

Should the LLC elect C corporation status on Form 8832?

Usually not just to sell into Latin America. After the election, all the LLC's profit bears 21% federal corporate tax (about 14% on FDDEI from sales to foreign buyers), dividends to a Chinese owner are withheld, generally at 10% under the treaty, and the LLC generally can't change classification again for 60 months. It fits sellers who plan to keep profit in the U.S. or also sell heavily in the U.S. and need a U.S. corporate identity. Before deciding, compare several years of tax and compliance cost both ways.

Learn more

Mercado Libre onboarding documents, logistics options, Latin American import taxes and an entity-choice table for four kinds of sellers are in our Mercado Libre seller guide; filling out Form 5472 and its penalties are covered in our Form 5472 guide. To confirm what your LLC needs to file, book a free 15-minute call or message us on WeChat at YCLUSA.