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 Virginia, a partnership is recognized as a business arrangement where two or more individuals engage in a trade or business, each contributing resources such as capital, property, or labor, and agreeing to share profits and losses. Virginia acknowledges both general partnerships and limited partnerships. In a general partnership, all partners share unlimited personal liability for the business's debts and obligations. Conversely, a limited partnership consists of at least one general partner, who manages the business and is personally liable for partnership obligations, and one or more limited partners, whose liability is restricted to their investment in the partnership. Partnerships in Virginia are required to file an annual information return (Form 1065) to report their financial activities, but they do not pay income tax at the partnership level. Instead, profits and 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 the income or loss, rather than a Form W-2.