Tax Treatment
- A partnership as an entity is not subject to federal income tax. It is, however, required to file an information return with the IRS showing profits and losses, and indicating each partner's proportionate share of each.
- Partnership profits and losses are passed to the partners based on their proportionate shares in the business.
- Partners report their shares of partnership profits or losses on their individual tax returns.
Advantages
- Each partner can bring unique knowledge, skills and experience to the business.
- Pooled capital for business start-up and operation.
- Partnerships are easy to form and operate.
Disadvantages
- Partners are personally liable for business indebtedness.
- Partnership profits are taxed to the partners as ordinary income.
- At the death of one of the partners, the partnership ceases, unless arrangements have been made to the contrary.
- If a partner dies, becomes disabled or retires, it may be difficult to transfer his or her ownership interest to a third party.
Back to Top | Next
Ohio National is not affiliated with, nor does it endorse or sponsor, any particular prospecting, marketing or selling system.
