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Taxation of Limited Partnerships

Limited partnerships (LPs) are pass-through entities for tax purposes. This means the partnership itself doesn’t pay income taxes; instead, profits and losses are allocated to individual partners based on their ownership share. Each partner reports their share on their personal tax return, paying taxes at their own rate. The general partner manages the LP and may have different tax obligations, while limited partners are typically passive investors with limited involvement. This structure offers flexibility and potential tax benefits, but partners should consider the specific partnership agreement and consult a tax professional for personalized advice.