An unincorporated organization with two or more members is generally classified as a partnership for federal tax purposes if its members carry on a trade, business, financial operation, or venture and divide its profits. However, a joint undertaking merely to share expenses is not a partnership. For example, co-ownership of property maintained and rented or leased is not a partnership unless the co-owners provide services to the tenants.
- Partners can be individuals, corporations, trusts, estates, and other partnerships.
- Each partner contributes money, property, labor or skill, and expects to share in the profits and losses of the business.
- A partnership does not pay tax on its income, but "passes through" any profits or losses to its partners. Partners must include partnership items on their tax returns.
Two common forms of partnerships are general partnership and limited partnership.
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