An entity that combines the benefits of a partnership with the liquidity of publicly traded securities represents a unique form of investment. These entities, structured as limited partnerships or limited liability companies, offer pass-through taxation, meaning profits and losses flow directly to the individual owners, avoiding corporate income tax. An example might be a pipeline operation structured to distribute profits to its unit holders. This structure is attractive for businesses with stable cash flows and substantial depreciable assets.
The appeal lies in the potential for higher after-tax returns for investors. The pass-through structure avoids double taxation. Furthermore, they can provide access to sectors like energy, real estate, and infrastructure that might otherwise be difficult or expensive to invest in directly. Historically, their emergence provided an avenue for capital formation in sectors requiring significant long-term investment.
