Technically, limited liability companies cannot be publicly traded. However, LLCs have a flexible tax structure that allows them to be taxed as a partnership. Because of this feature, an LLC can structure itself as a publicly traded partnership and trade ownership interest on a securities exchange.
Features of an LLC
A limited liability company is a business entity that combines the limited liability of a corporation with a flexible tax structure. Unlike partnerships, LLC owners aren't personally liable for company debts and can't be held liable for the behavior of other LLC employees and owners. An LLC can elect to be taxed as a corporation, which means that the LLC itself pays income tax. It can also be taxed as a partnership, which means that profits and losses flow through to the LLC owners.
Publicly Traded LLCs
LLCs can issue ownership to multiple LLC members. As long as it's stipulated in the operating agreement, ownership interest in the LLC can then be assigned, transferred or sold. However, federal and state laws stipulate that interest in an LLC can't be publicly traded. To get around this rule, an LLC can elect to be taxed as a partnership and structure itself as a publicly traded partnership. The LLC must market itself to investors as a publicly traded partnership -- PTP, for short -- but still retains the limited liability of an LLC.
Publicly Traded Partnerships
According to the National Association of Publicly Traded Partnerships, PTPs tend to be energy and natural resource-related businesses. To be a PTP, the partnership cannot have more than 100 partners and the partnership can't trade more than 2 percent of partnership interest each year. A partnership is considered to be publicly traded if interests are traded on an established securities market -- like the New York Stock Exchange or the NASDAQ -- or are tradeable on a secondary market.
Publicly Traded Ownership Interest
LLCs structured as PTPs can be listed on stock exchanges along with publicly traded corporations. Rather than issuing stock, PTPs issue units of interest in the partnership. Consumers that own interest in a PTP can buy and sell their interest on the stock market just as they would with corporate stock. Owners can receive income from the PTP in the form of dividends, interest, rental income and gains from sales. Most PTPs issue distributions of partnership income on a quarterly basis, which are typically nontaxable to the owner.