Different business structures have different rules for the business owner's compensation. Partners are not paid a regular salary and should not be paid as W-2 employees. Instead, they earn distributions of the business profits. The distribution percentage for each partner should be allocated in the partnership agreement.
A partnership files 1065, Annual Information Return, to report the income, deductions, gains, and losses from the operation. 1065, informational return only reports information to the IRS and does not pay tax on the return. The taxes are passed onto be taxed on the partners' personal returns. The partnership should issue a Schedule K-1 to each partner that reports each partner's share of the partnership's income, deductions, credits, and losses.
For more information, see the link below:
Tax Information For Partnerships
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