What Is a Master Limited Partnership (MLP)?

Business & Management
#1

A master limited partnership (MLP) is a publicly listed limited partnership that operates as a commercial enterprise. They combine the tax advantages of a private partnership (earnings are taxed only when distributions are made to investors) with the liquidity of a publicly listed business.
A master limited partnership is a type of limited partnership that trades on national stock markets. Because MLPs are obligated to distribute all available cash to investors, they are well-positioned to benefit from cash flow. They can also assist firms with high capital costs, such as the energy sector, lower their costs of capital.
In 1981, the first MLP was formed. By 1987, however, Congress had effectively confined their use to the real estate and natural resources industries. MLPs do not pay federal income taxes, thus these restrictions were put in place to avoid a large loss of corporate tax revenue.