What are the Eligibility Criteria for Filling Form 1065?

One thing that confused me initially was the idea that no profit means no Form 1065.

That's not necessarily correct.

The IRS says a domestic partnership generally must file unless it neither receives income nor incurs expenditures treated as deductions or credits for federal income tax purposes. So simply having no taxable profit doesn't necessarily eliminate the filing requirement.

There are also situations where a partnership has special filing requirements even when its normal activity is limited. For example, the IRS instructions state that a qualified opportunity fund partnership must file Form 1065 and attach Form 8996 even if it had no income or expenses to report. A partnership that is, or has a branch that is, a qualified derivatives dealer also has a filing requirement.

For a normal small partnership, though, the basic question is whether it is a partnership for federal tax purposes and whether it meets the applicable filing requirements.

I had a slightly different situation because one of our partners was living outside the U.S.

Having a foreign partner doesn't automatically mean the partnership doesn't file Form 1065. In fact, the IRS instructions specifically address foreign partners on Form 1065.

There can be additional requirements when a partnership has foreign partners, particularly if the partnership has income effectively connected with a U.S. trade or business. In some circumstances, the partnership may have withholding obligations under Section 1446 and may need to file Forms 8804, 8805, and 8813.

For a foreign partnership, the rules are different again. Generally, a foreign partnership with effectively connected income or U.S.-source income may have to file Form 1065, although the IRS provides specific exceptions.

So I wouldn't use "NRI partner" or "foreign partner" alone to decide whether Form 1065 is required. The partnership's entity status, income, and partner composition all matter.

From what I learned when filing for our two-member LLC, the important point is how the entity is classified for federal tax purposes, rather than simply whether it calls itself an LLC.

A domestic partnership generally has to file Form 1065 unless it neither receives income nor incurs any expenditures that are treated as deductions or credits for federal income tax purposes. The IRS also specifically says that an LLC classified as a partnership for federal tax purposes follows the same filing requirements.

So if your two-member LLC is taxed as a partnership and has business income or deductible expenses, Form 1065 would generally be required.

The partnership itself normally doesn't pay federal income tax on its partnership income in the same way a C corporation does. Instead, the income, deductions, and other tax items pass through to the partners, who report their respective shares on their own tax returns. The partnership generally provides each partner with a Schedule K-1.

I'd still check the entity's IRS classification and the specific filing instructions because there are exceptions and additional schedules that can apply.

I have filled out the Form 1065 as before 15 March, which is the due date of filing Form 1065 through the online tax filing services, and submitted all the supporting documents, like year-end financial statements, loss and profit statements, annual revenues, deductible expenses, and net income. 

Form 1065 can be filed by: 

• Limited liability companies, with US headquarters, and marked as domestic partnerships. 
• Two or more people who run a business or do trade together can be considered a partnership and file Form 1065.