Final answer:
A partner in a business must issue a Form K-1 to each partner of the business for tax purposes, reflecting their share of the business's income and losses.
Step-by-step explanation:
A partner in a business must issue a Form K-1 (Partner's Share of Income, Deductions, Credits, etc.) to each partner of the business. This form is part of the annual tax filing for partnerships and reflects a partner's share of the business's income, deductions, credits, etc. A partnership itself does not pay taxes. Instead, it “passes through” any profits or losses to its partners. Partners include their respective shares of the partnership's income or loss on their personal tax returns.
Partnerships are common business structures that involve sharing in the responsibility of running the business as well as sharing the profits. This structure offers flexibility but also entails joint liability among partners. In addition to tax advantages, partnerships have the ability to raise more capital compared to sole proprietorships due to multiple partners contributing assets.