Partnerships and Investors

There are domestic (US) partnerships and foreign (non-US) partnerships. A domestic partnership must file an annual tax return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. Instead, it “passes through” profits or losses to its partners (Individuals, Corporations, Trusts, etc.) through a K-1 form. Private equity and venture capital funds will often be structured as a limited partnership.

A US person who receives a Schedule K-1 that reports income from a partnership, or who otherwise has income from a foreign partnership is subject to US taxation on such income.  This applies to Limited Partners in an investment fund as well.  If a foreign partnership has ECI (effectively connected income) that is allocated to a non-US partner, the partnership is required to report and pay a withholding tax to the IRS.  

As is the case with Funds, foreign businesses, operating as partnerships, with US operations generally must file a US partnership return of income and non-US partners may be required to file US non-resident income tax returns in the case of individuals or a US Income Tax Return of a Foreign Corporation if the partner is a corporation.  Non-US partnerships with US partners or US connections may also have complicated US reporting requirements even with no US operations.

Our Advisory Services

• US tax planning for US and non-US investors of partnerships
• Allocations of partnership income, losses and deductions according to substantial economic effect
• FATCA & CRS reporting
• Withholding tax

Our Compliance Services

Under the US tax system, domestic and foreign partnerships have complex reporting requirements for the Partnership itself and for its Partners or Investors.  These include reporting the partnership allocations to the partners through K-1s or determining withholding taxes.

Integrated Partnership and Investor Experts

Partnerships, both domestic and non-US, have unique characteristics and require expertise across several areas including Funds, Corporations, Trusts and Private Client.  We coordinate all aspects of Partnership reporting along with the related Investor reporting, through to the analysis of an Individual’s or Entity’s specific position.

Contact us to discuss how we can help.