Partnerships: Taxes, liability, and how they work – YouTube video text script

A partnership is when two or more people come together to run a business and share in the profits and losses.

Each partner may contribute money, property, or services to the business, and they share in the profits and losses.

In a partnership, power is shared between the partners.

Partners usually have unlimited liability unless an agreement says otherwise.

Each partner can be responsible for all business debts.

If one partner makes poor decisions, it can harm the business and even affect the other partners personal assets.

The partnership files an informational Return Form 1065 and provides each partner a Schedule K1 showing their share of income, deductions and credits. Each partner reports their share of the partnership's income or loss on their personal tax return.

If you'd like more information about partnerships, see IRS Publication 541, Partnerships, as well as the instructions to Form 1065 and 1040 on IRS.gov.

Also visit the Small Business and Self-employed Tax Center for additional resources and guidance.