BACKGROUND

A partnership is the relationship existing between two or more persons who join 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 business. A partnership may exist whether or not a formal partnership agreement is made.

Note that two or more member LLC is treated as partnership for federal tax purpose unless it elects to be treated as an S-corporation.

A partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations. A partnership 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 items on his or her tax return.

Partnership the so-called information tax return is filed on Form 1065, U.S. Return of Partnership Income.