A partnership is an unincorporated organization formed by two or more persons. The partnership itself is not subjected to tax, as all income, deductions and credits pass through to the partners. This income is reported to each partner on a Schedule K-1 and to the IRS on Form 1065.
Pertinent data on Partnerships:
Liability: General Partner-Unlimited; Limited Partner-Limited
Nature of Owner's Income: Self-employment income (general partners only)
Federal Tax Filing Form Used for Partnership:
Annual Return of Income: Form 1065
Employment taxes: 941, (943 for farmers), 940, 8109-B
Federal Tax Filings Form Use for Individuals In A Partnership:
Income Tax: Form 1040, Schedule E
Self-employment tax: Form 1040, Schedule SE
Estimated tax: 1040-ES
Compensation reported: Schedule K-1Advantages:
Fairly low cost to establish
Other partners to share responsibility
Limited liability for limited partners
100% of medical premiums deductible for partnership
Partners can receive a proportionate income share depending on their investment
Unlimited liability for general partners
Lack of continuation at death of partners
Self-employment tax (general partners)
Limited partners are subject to passive income/loss rules
Limited Liability Company
TaxesBusiness partners need the information on this form to complete their own tax returns. Here are the details.
TaxesSchedule K-1 is a U.S. tax document used to report income, losses and dividends.
Financial AdvisorMLPs are a different animal when it comes to taxes. Here's how they work.
TaxesMost U.S. taxpayers will be familiar with the 1040. By the end of filling it out, you'll know how much tax you owe, or what your refund is.
InsightsLLPs are a flexible legal and tax entity that allows partners to benefit from economies of scale by working together while also reducing their liability for the actions of other partners.
Small BusinessLearn the differences between the types of business organizations so you can determine how to best structure your business for tax and liability limitations.
Managing WealthAll taxpayers need to know three things when filing a 1040: which form to use, how to file and where to file. After reading this, you'll know all three.
Personal FinanceFind out what information you need to pull together before filling out your return.
TaxesThe need for 1099 forms and why you must track the income reported on them. If you don't, the IRS will find it anyway and go after you – a costly mistake.
RetirementYour obligations as an employer include various employment taxes. Use this form to report them.