A partnership is the relationship between two or more persons who work to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.

There are generally two types of partnerships: general partnerships and limited partnerships. In a general partnership all partners have personal liability for the obligations of the partnership. In a limited partnership, there is typically (1) a general partner who manages the business and has personal liability for the obligations of the partnership, and (2) one or more limited partners who do not participate in the management of the business, and whose liability for the obligations of the partnership is limited to the partner’s capital contribution.

A partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. Instead, any profits or losses pass through to its partners. Each partner includes their share of the partnership's income or loss on their tax return.

Partners are not employees and should not be issued a Form W-2. The partnership must furnish copies of Schedule K-1 (Form 1065) to the partners by the date Form 1065 is required to be filed, including extensions.

In Indiana, a partnership is recognized as a business entity consisting of two or more individuals who collaborate to conduct a trade or business. Partners may contribute capital, property, labor, or expertise and are poised to share in both the profits and losses. Indiana acknowledges both general partnerships and limited partnerships. In a general partnership, all partners bear personal liability for the partnership's debts and obligations. Conversely, a limited partnership features at least one general partner who manages the business and assumes full personal liability, alongside one or more limited partners whose liability is confined to their investment in the partnership. Partnerships in Indiana are required to file an annual information return (Form 1065) to report their financial activities but do not pay income tax at the entity level. Instead, profits or losses are 'passed through' to the individual partners, who then report their respective shares on their personal tax returns. Partners are considered owners, not employees, and thus receive a Schedule K-1 detailing their share of income or loss, rather than a W-2 form. The Schedule K-1 must be provided to partners by the deadline for filing Form 1065, including any extensions granted.