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U.S. partnerships control more than $40 trillion in assets, vastly outnumber U.S. public firms, and contribute significantly to the U.S. tax non-compliance of pass-through entities, which is larger than the non-compliance of publicly traded corporations. However, the prior literature provides extremely little evidence explaining the pervasive use of such entities and which specific characteristics enable the lightly taxed nature of partnership business income. Using administrative U.S. tax data, we first create graphical organizational structures by tracing income through millions of partnership entities. We show that 80 percent of partnership groups are simple structures composed of one single partnership owned directly by individual taxpayers. In contrast, the most complex structures resemble “webs,” characterized by multiple tiers of ownership and clusters of overlapping partners. Second, we determine the entity attributes associated with partnerships developing into complex organizations. Third, conditional on being selected for audit, complex partnerships are four percent less likely to be assessed additional tax, but the amount of assessments is larger. Fourth, we show that complex partnership audits have a high return-on-investment, generating $20 of assessments for each $1 spent, which is a rate over eight times that for corporations. Thus, beyond adding to the nascent literature explaining the prevalent use of partnerships, we provide new insights about the under-reporting of tax on U.S. business income and quantify the potentially large increases in tax revenue collection that could be obtained from increased enforcement of complex partnership businesses.