Greta, if you have a separate partnership entity set up then I would imagine you would just file a 1065 partnership return with the applicable K-1 forms. And yes a partnership can have rental real estate income and regular business income, I.E. it will be segregated on the K-1 form which has separate lines for each of the aforementioned. Also I would imagine a partnership LLC has the same legal protection as a sole proprietor LLC... just my opinion... Happy New Year