A Partnership is a business arrangement with two or more members who together share profits and losses. Partnerships are not taxed. Instead, taxes are taken out of the partner's share of profits.

A new business incurs losses initially, which can be offset working as a partnership. To deduct losses, you have to satisfy the passive activity loss (PAL) rules.


  • Partners can bring in much-needed capital and expertise to the business.
  • Partners file taxes as individuals and can deduct losses from their tax returns.


  • Unlimited liability
  • Lack of autonomy, joint decisions are required
Next Level Tax partnerships