Partnerships

 General Partnership

A partnership is the entity created when two or more persons join to carry on a business.  Each person contributes money, labor, and skills, and each shares in the profits and losses of the partnership.  Partnerships, like sole proprietorships, are subject to little regulation and are easy to establish.  A formal partnership agreement is recommended in order to address potential conflicts before they arise.  A general partnership, like a sole proprietorship, must file an assumed name certificate (DBA) with the county clerk's office in the counties in which the business operates.

Partnerships are required to file an annual information return (form 1065) to report the income, deductions, gains, and losses, from their operations, but the partnership does not pay income tax. It "passes through" any profits or losses to its partners.  Each partner includes their share of the partnership's income or loss on their individual 1040 tax return and each partner has unlimited liability for the debts of the business.  Use the information in the charts below to help you determine some of the forms that you may be required to file.

Limited Partnership

There are two types of partners in a limited partnership.  General partners have the same powers and liabilities as partners in a general partnership.  However limited partners are not liable for the obligations of the partnership and they do not have a voice in the management of the business.  Limited partners function as investors receiving a share of the profits based on their allocation in the partnership agreement.  In general the reporting for tax purposes is the same as for a general partnership.  In Michigan Limited Partnerships must register with the Bureau of Commercial Services, Corporation Division at (517) 241-6400 or visit the Bureau Website – www.michigan.gov/corporations

Partnerships

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