Publicly Traded Partnerships 101
A publicly traded partnership (PTP) is exactly what its name suggests: a limited partnership the interests in which (known as "units") are traded on public exchanges, just like corporate stock. The PTPs which engage in active businesses, primarily in the energy industry, are commonly known as master limited partnerships or MLPs. There are a number of PTPs which are not active businesses but investment funds, in particular commodity pools. These are not considered MLPs.
A limited partnership has one or more general partners (they may be individuals, corporations, or other partnerships) which manage the partnership, and limited partners, which provide capital to the partnership but have no role in its management. When an investor buys units in a PTP, he or she becomes a limited partner.
PTPs are formed in several ways. A nontraded partnership may decide to go public. Several nontraded partnerships may "roll up" into a single PTP. A corporation may spin off a group of assets or part of its business into a PTP in which it retains an ownership interest, either to realize the assets' full value on the marketplace or as an alternative to debt.
A corporation may fully convert to a PTP, although since 1986 the tax consequences have made this an unappealing option for most. Or, a newly formed company may operate as a PTP from its inception.
For additional information, please see the links to the left and the Investor Relations area of the website.