Profit and loss allocations must match the partnership agreement.

Your K-1s must reflect ownership percentages or special allocations exactly as agreed.

Partners owe self-employment tax on their share of business income.

This is a major difference from some other entities, and first-year filers often miss it.

Partnerships must track partner capital accounts.

Each partner’s “capital account” shows contributions, withdrawals, and allocated income — and partnership returns require accuracy here.

Partner basis affects tax outcomes.

A partner’s basis determines whether losses are deductible, and whether distributions are taxable.

Guaranteed payments are not the same as wages.

Partnerships cannot pay partners W-2 wages; instead, partners may receive “guaranteed payments” that are taxed differently.

Clear bookkeeping is essential.

You’ll need accurate income, expenses, contributions, and distribution records to generate Schedule K-1s correctly.