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 Washington State, a partnership is recognized as a business entity consisting of two or more individuals who engage in a business for profit. Partners contribute capital, labor, or skills and share in the profits and losses. There are two primary types of partnerships: general partnerships (GPs) and limited partnerships (LPs). In a GP, all partners share equal responsibility for the business's debts and obligations. Conversely, in an LP, there is at least one general partner with unlimited liability and one or more limited partners whose liability is restricted to their investment in the partnership. Partnerships in Washington are governed by the Revised Uniform Partnership Act for GPs and the Washington Uniform Limited Partnership Act for LPs. Partnerships do not pay federal income tax at the entity level but must file an annual information return (Form 1065) with the IRS. Profits and losses are 'passed through' to the partners, who report them on their individual tax returns using Schedule K-1 (Form 1065). It is important to note that partners are not considered employees and should not receive a Form W-2.