Entities
Partnership
A partnership is a business owned by two or more people who share profits and losses. US partnerships file Form 1065 and issue a Schedule K-1 to each partner, but pay no income tax themselves. A multi-member LLC is treated as a partnership by default.
In plain terms: A business with more than one owner, taxed by passing results to the owners.
Why it matters
Most founders meet the partnership rules without forming a partnership, because a multi-member LLC is taxed as one by default. The practical consequences are the earlier filing deadline and the fact that partners are taxed on allocated profit whether or not it was distributed.
Common misunderstanding
Assuming a general partnership offers liability protection. It does not — that is what forming an LLC adds.
Read the full guideUS company formation