A Publicly Traded Partnership (PTP) is a type of limited partnership that is managed by two or more partners and traded consistently on an established securities market. PTPs are similar to Master Limited Partnerships (MLPs), but there are minor differences in tax treatment and shareholder structure. PTPs are mostly in energy-related businesses and can offer investors quarterly income that receives favorable tax treatment.

Here are some key takeaways about PTPs:

• 90% of a PTPs income must come from "qualifying" sources as outlined by U.S. Code.
• PTPs avoid the statutory corporate income tax at state and federal levels, but if the 90% income threshold is not met, the partnership is considered a corporation for tax purposes.
• As a partnership, PTPs do not pay tax and are, therefore, able to pass more of their income via quarterly cash distributions to investors compared to corporations.
• A PTP investor will receive an annual Schedule K-1 detailing the flowthrough tax information for the interest owned, rather than a Form 1099-DIV, which is received when corporate stock distributes a dividend.
• An investment in a publicly traded partnership is as fluid as ownership of a publicly traded stock.

IRC Section 7704 is the main law defining PTPs and how to tax them. According to this section, publicly traded partnerships that receive at least 90 percent of their income from qualifying sources will not pay entity level tax and will follow a pass-through method to members for tax items.