This episode introduces the fundamentals of partnership taxation under U.S. federal law. It explains how partnerships are treated as pass-through entities—allocating profits and losses directly to partners, who report them individually regardless of actual distributions. The discussion covers the concept of phantom income, the importance of tax basis, self-employment tax exposure, and the default and customizable rules for allocations under the Revised Uniform Partnership Act. The episode also outlines key tax-related provisions to include in a partnership agreement—such as distribution planning, guaranteed payments, and exit strategy clauses. It concludes with a reflection on the practical implications of partnership taxation in entity selection and business planning.