Q: How are partnerships taxed?
A: Dear Business,
A partnership is basically a sole proprietorship with multiple owners, and the partners typically share equal responsibility for the business’ assets and liabilities. Like a sole proprietorship, a partnership is not a separate entity from its owners from a tax perspective.
The partnership reports its income, deductions, losses, and gains to the IRS by filing a Form 1065. But all of the company’s profits and losses are passed through to the individual partners, who report this on their individual returns via Schedule K-1 and pay taxes at their individual tax rates.
Like sole proprietors, owners of a partnership are required to pay self-employment taxes and submit quarterly estimated tax payments.
For guidance on your company’s taxation, entity structure, or any other matter affecting your operation’s legal foundation, contact a Personal Family Lawyer® with business planning expertise today.