An LLP passes through its taxation to its partners. Each partner needs to report his share of the company’s income or loss on IRS Form 1065 Schedule K. A general partner’s income is subject to income tax and self-employment tax. A limited partner, however, reports his share as passive income or loss. Passive income is not subject to self-employment tax. But any passive loss can only be deducted from other passive income or losses, and not from a limited partner’s general income.