What Is a Partnership and How It Is Taxed in Kansas and Missouri

A partnership is a business structure where two or more people operate a business together for profit.

How Partnerships Work

A partnership is not taxed like a corporation.

Instead:

• The business itself does not pay income tax

• Income passes through to the partners

• Each partner reports their share on their personal tax return

The Role of the K-1

Each partner receives a Schedule K-1 showing their share of:

• Income

• Deductions

• Gains or losses

This is used when filing personal taxes.

Profits and Losses

Partners are taxed on their share of profits even if they do not receive cash distributions. Losses may also pass through and offset other income, depending on tax rules.

Why Structure Matters

Partnership agreements determine how income and losses are allocated. These decisions can have significant tax consequences and should be structured carefully.