A partnership can have any number of partners and those partners bring more creativity, skill, capital and experience to a business than any of the partners individually possess.
Every partnership should have a written agreement though there is no legal requirement to do so. This agreement should specify how the partnership will operate, how it will be financed, how responsibilities will be divided among the partners, how profits and losses will be shared, and what happens to the partnership if one partner withdraws, becomes disabled or dies.
A partnership files an information tax return (Form 1065), but pays no income tax itself. The income or losses are passed through to the partners who report them on their individual tax returns in shares agreed upon by the partners – not necessarily equally. A partnership, like a sole proprietorship, pays self-employment tax on net income rather than social security taxes on wages.
Partners have similar options in the area of fringe benefits and retirement plans as those available to sole proprietors. These options include: