Choosing the Right Entity -- Partnership

Another popular business entity is the Partnership.


The entity is owned by 2 or more taxpayers together.


The entity files its own tax return and reports activity of the business to its owners based on their share of ownership in the business.?


The entity does not pay its own tax on the federal level, but the income is subject to tax on the personal level.


Some interesting points on the partnership:


? Partners are not allowed to be paid as employees on a W-2 from the partnership.

? As with the Single Member LLC entity, the income passed through to the active partners is subject to the self-employment tax, a flat 15.3% and is in addition to the income tax.?

? Passive partners do not need to pay the self-employment tax.


A partnership is a common entity type chosen when there is more than one person doing business together due to its ease and flexibility.?


Have a question about this or another tax-related matter? Feel free to reach out!


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