[philiphodgen]

This is exactly right. HNers who are US citizens will set up a perfectly ordinary corporation in their country of residence and run their company perfectly legally in that country. Years later they hear of Form 5471. The government's SOP on this is to impose a $10,000 per year penalty then force you to beg for the penalty to be removed. Sometimes that happens. Sometimes that doesn't. How many small businesses could stand a $40,000 or $50,000 hit just because you didn't file a piece of paper saying you owned stock in a foreign corporation?