Partnership

Partnership

  • Must have 2 or more people or entities
  • Unlimited liability
  • Limited partners have limited liability

 

  • Limited partnership must have 1 general partner to accept liability
  • If more than 50% of the partnership changes, you have to start a new partnership

 

  • More legal costs than sole proprietorship
  • Tailored Partnership Agreement
  • Income & loss split between partners

 

  • Equity to be contributed by partners
  • Termination of partner
  • Death of partner
  • Non-compete issues
  • Termination of the partnership

 

  • “Flow-through” or “Pass-through” entity
  • Does not pay income taxes directly
  • Partners pay income taxes on partnership income

 

  • Certain expenses are not deductible by partnership & must be reported separately on the partner tax return:
    • Health insurance
    • Charitable deductions

 

  • Files a Form 1065
  • Return due March 15th or April 15th depending on tax year
  • Extension until September 15th
  • Provides Schedule K-1 to each partner
  • Income & Loss allocation can be different
  • Partners must have Schedule K-1 to prepare their tax returns
  • Easier to withdraw assets with less tax consequences