Guidance for Special Types of Businesses

Special Rules for Certain Business Structures

Special Provisions for Partnerships

Organizations Classified as Partnerships. 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.

Every partnership that engages in a trade or business or has gross income must file an information return on Form 1065, U.S. Return of Partnership Income, showing its income, deductions, and other required information. A partnership computes its income and files its return in the same manner as an individual. However, certain deductions are not allowed to the partnership. Also, certain items must be separately stated on the partnership return and included as separate items on the partners’ returns. These items are listed on Schedule K (Form 1065).

Important References:

Form 1065                                        U.S. Return of Partnership Income
Instructions for Form 1065
Form 1065 (Schedule K-1)             Partner's Share of Income, Deductions, Credits, etc.
Instructions 1065 (Schedule K-1)   Instructions for Form 1065 (Schedule K-1)
Form 8832                                        Entity Classification Election
Publication 541                                Partnerships
Publication 553                                Highlights of The 2005 Tax Law Changes