Are active partners in a partnership considered to be employees or self-employed?

Q: Are active partners in a partnership considered to be employees or self-employed?

A: Partners are considered to be self-employed. The disadvantage to this is that all income
earned by the partnership is subject to self-employment tax. Owners of formal entities such
as S corporations only pay Medicare and social security taxes on compensation. Their
distributive share is not subject to employment taxes.