A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.
A partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. Instead, it "passes through" any profits or losses to its partners. Each partner includes his or her share of the partnership's income or loss on his or her tax return.
Partners are not employees and should not be issued a Form W-2. The partnership must furnish copies of Schedule K-1 (Form 1065) to the partners by the date Form 1065 is required to be filed, including extensions.
If you are a partnership, you may liable for…
- Annual return of income
- Social security and Medicare taxes and income tax withholding
- Federal unemployment (FUTA) tax
- Depositing employment taxes
- Excise Taxes
- If you are a partner in a partnership, you may liable for…
- Income tax
- Self-employment tax
- Estimated tax