Partnerships

An unincorporated business structure that two or more parties form and own together is called a Partnership. a Partnership may be comprised of individuals, corporations, other partnerships, or other legal entities.  Each member contributes in the profits and losses of a Partnership.  A Partnership could be as simple as a husband and wife running a business together to thousands of general partners and limited partners running a business in the form of a partnership. 

Partners may contribute capital, labor, skills, and experience to the business. They may have unlimited legal liability for the actions of the partnership and its partners.  

A common type of partner is a general partner, who actively manages and exercises control over the business operations. Limited partners have limited legal liability. A limited partner cannot manage or exercise control over the business.

Among the most common types of partnerships are: 

(1) General partnerships (GP)

(2) Limited partnerships (LP) and 

(3) Limited liability partnerships (LLP).  

Partnership Agreement:

A partnership can be started without an oral or written contract. However most Partnerships have a written agreement in place known as a Partnership Agreement.  The partnership agreement specifies the purpose of the partnership and each partner's rights and responsibilities.

Form 1065:

A Partnership reports the income and expenses on IRS Form 1065. Partnership returns are due the fifteenth day of the third month after the close of a partnership's tax year. So a Calendar Year Partnership must file its Tax Return on or before March 15th. A six month extension can be requested for a partnership. A Partnership does not pay tax on entity level, however each partner is required to report their share of partnership income on their individual tax return. The partner's share of income is specified on Partnership K-1 and the amounts are used to be reported on the Individual Partner's Tax Return.