General Partnership

This type of organization requires two or more people, hence, a partnership. Each partner is referred to as a “general” partner. A general partner is liable for all debt incurred by the partnership and likewise is entitled to receive all income generated by the partnership. A partnership files an annual tax return, form 1065, and the partners each receive Schedule K-1’s which they must report on their tax returns. A partnership has a single level of tax which means that the partnership does not pay tax; it merely passes all income to the partners. A partnership is a very flexible form of business ownership although the liability incurred by the partners makes it an unattractive choice of entity for many enterprises.