Partners are taxed on their allocated share of the partnership's results whether or not cash was distributed, which can create a tax bill without matching cash. Private funds structured as partnerships and publicly traded vehicles such as a master-limited-partnership both generate them.
K-1s often arrive late, well after other tax documents, and amended versions are common, which can force an extension or an amended return. Multiple state allocations add further complexity for pass-through entities operating across state lines.
The administrative burden is a genuine cost of the structure and is worth weighing against the tax advantage, particularly for smaller positions where the accounting fee can exceed the benefit. See limited-partnership and commodity-pool.
Related: master-limited-partnership, limited-partnership, commodity-pool, section-1256, cost-basis-method, private-equity