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 NEIGHBOR ISLANDS Maui. Tel: 808-984-8500. Fax: 808-984-8522. Molokai. Tel: 808-553-5541. Fax: 808-553-9878. Hawaii. Tel: 808-974-6321. Fax: 808-974-6300. Kauai. Tel: 808-274-3456. Fax: 808-274-3461.
Every partnership engaging in trade or business, or having income from sources within the State, shall file a partnership return pursuant to section 235-95, HRS, and this section, regardless of the partnerships principal place of business or the residency status of the partners.
Generally, a partnership does not pay income tax on its income and does not file an income tax return. Instead, each partner files an income tax return to report their share of the partnerships net income or loss.
Each partner reports their share of the partnerships income or loss on their personal tax return. Partners are not employees and shouldnt be issued a Form W-2. The partnership must furnish copies of Schedule K-1 (Form 1065) to the partner. For deadlines, see About Form 1065, U.S. Return of Partnership Income.
As an individual, you must then report your partnership income on your personal income tax return. Use T2125 Statement of Business or Professional Activities to outline your other revenue and expenses, and then transfer your share of the partnership revenue expenses to your income tax return as prompted.
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A partnership is not considered a person or a taxpayer. It is a relationship, generally defined as two or more persons carrying on business with a view to profit. Therefore, a partnership does not file a tax return and does not pay taxes. (However, as noted below, a partnership may have to file an information form.)
Each partner has a separate capital account for investments and his/her share of net income or loss, and a separate withdrawal account. A withdrawal account is used to track the amount taken from the business for personal use. The net income or loss is added to the capital accounts in the closing process.

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