What is direct participation program?

This is an arrangement that allows investors to participate in the income and tax benefits of a business. They're most commonly found in real estate and the energy sector.

Where have you heard about direct participation program?

They're sometimes known as a direct participation plan (DPP), and you might have heard about them being used as tax shelters. However, recently legislation has reduced some of these tax benefits.

What you need to know about direct participation program.

They're usually set up as a limited partnership or limited liability company. Using these structures mean the DPP does not pay tax at the corporate level. By making a direct investment in one of these programs, the investor becomes a part owner of the enterprise. They're sometimes known as passive investors or sleeping partners. DPP securities are not usually traded publicly, so their value is determined by their underlying assets rather than public markets.

Find out more about direct participation program.

To learn more about this type of investment, check out our guide to passive income.