A partnership is the name of an entity that is owned by two or more persons (or other entities) that join together 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 partnership 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, so they will not receive a Form W-2 from a partnership. Instead, the partnership issues copies of Schedule K-1 (Form 1065) to the partners. A domestic or US partnership is a partnership that is created or organized in the United States or under the laws of the United States or any State. For these purposes, the United States includes all 50 states and the District of Columbia. Code Section: IRC §7701 See Definition