Partnership
A business entity owned by two or more persons who share in profits and losses, taxed as a pass-through with each partner reporting their share on their individual return.
Detailed Explanation
Partnerships file Form 1065, an informational return, and issue each partner a Schedule K-1. Common types include general partnerships, limited partnerships, limited liability partnerships (LLPs), and multi-member LLCs taxed as partnerships. Each partner's share of self-employment income is generally subject to self-employment tax. Partnership tax includes complex rules around allocations, special allocations, basis adjustments, Section 754 elections, and the BBA partnership audit regime.
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Form 1065 (US Return of Partnership Income)
The annual federal information return filed by partnerships and multi-member LLCs treated as partnerships, with income passed through to partners on Schedule K-1.
Schedule K-1
A tax document issued by partnerships, S corporations, estates, and trusts to report each owner's share of income, deductions, credits, and other tax items.
Pass-Through Entity
A business entity that does not pay federal income tax at the entity level; instead, profits and losses pass through to owners who report them on their individual returns.
Limited Liability Company (LLC)
A flexible business structure that combines the liability protection of a corporation with the pass-through taxation and operational flexibility of a partnership.
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