What is a Master Limited Partnership?

A Master Limited Partnership (MLP) is a publicly traded partnership that is managed like a corporation. The nature of the partnership provides for the flow through of income to its partners. This essentially avoids double taxation on profits often paid by corporations, which pay corporate income tax in addition to its shareholders paying taxes on dividends. Individual investors buy ownership interests, or units, in the partnership through a stock exchange similar to purchasing shares of stock in a corporation. Because MLPs are yield-oriented, all earnings are paid out to shareholders.

MLP investments offer a limited universe of investments in natural resource extraction, transportation and processing. The partnerships are usually structured with “Senior” Common Units (publicly traded) and “Junior” Subordinated Units that carry the same distribution and are held by insiders or the General Partner (not publicly traded until converted to Common Units). Conversion timing is based upon achieving certain financial tests.

For more information visit the National Association of Publicly Traded Partnerships website or the Association's listing of publicly-traded MLPs.