Partnerships | FTB.ca.gov (2024)

Overview

A partnership involves 2 or more persons who run a business as co-owners.

There are 2 common types of partnerships:

• General partnership involves 2 or more general partners who share equal rights and responsibilities in managing the business.
• Limited partnership involves at least one general partner and limited partner(s).
  • General partners own and manage the business
  • Limited partners serve as investors only

Some key features of a partnership are:

• Partners decide the ownership structure and distribution of profit and losses
• Partnerships file Partnership Return of Income (Form 565)
• Each partners’ income is reported on their individual (Schedule K-1 Form 565)
• Each partner is responsible for paying taxes on their respective tax return

Set up a partnership

Visit Secretary of State's Starting a Business – Entity Types for more information.

Limited partners

As a limited partner, you:

• Contribute an amount of money or property to the business when it’s set up
• Are only liable for debts up to the amount you’ve contributed
• Cannot manage the business
• Cannot remove your original contribution

General partners

As a general partner, you:

• Are liable for all business debts
• Control and manage the business
• Can make irreversible (“binding”) decisions for the business

Filing requirements

You must file a Partnership Return of Income (Form 565) if you're:

• Engaged in a trade or business in California
• Have income from California sources
• Use a Pass-Through Entity Ownership (Schedule EO 568) to report any ownership interest in other partnerships or limited liability companies.
• If you have income or loss inside and outside California, use Apportionment and Allocation of Income (Schedule R) to determine California source income

Partners

Each partner must use a Partner's Share of Income Deductions, Credits, etc. (Schedule K-1 565) to report share of partnership’s income, deductions, credits, property, payroll, and sales.

General partnerships do not pay annual tax; however, limited partnerships are subject to the annual tax of $800.

For information on estimated payments, go to our due dates page.

Close your business (Dissolve)

Registered with SOS

If you close your business, you must file the required paperwork with the Secretary of State and us.

With us you must:

• File your final current year tax return. Check the applicable Final Return box on the first page of the return
• Stop doing business in California after the final taxable year

Not registered with SOS

• File your final current year tax return. Check the applicable Final Return box on the first page of the return
• Stop doing business in California after the final taxable year

Visit Guide to Dissolve, Surrender, or Cancel a California Business Entity (FTB Publication 1038) for more information.

Revive your business

To revive your suspended or forfeited business entity, you must be in good standing with the California Secretary of State.

You must:

• File all delinquent tax returns
• Pay all delinquent tax balances, including penalties, fees, and interest
• File a reviver request form: Application for Confirmation Letter for Limited Partnership Revival (FTB 3557 C LP)

Apportionment and allocation

You may have California source income if you sell goods to California customers or perform a service to customers who received the benefit of that service in California or own an intangible used in California. Visit Apportionment and allocation for more information.