The following post is written by Brian So, a financial advisor and blogger at www.aafsinsurance.com.
Introduction to MLPs
Master Limited Partnerships, or MLPs, are publicly traded investment partnerships based in the U.S. They combine the liquidity of a publicly traded company with the tax efficiency of limited partnerships. The business is structured with a general partner in charge of operations, and limited partners providing the capital. Units of the partnership represent the limited partner's stake in the company, and are traded publicly on stock exchanges.
In order to qualify as a MLP, the partnership must derive at least 90% of their income from the energy sector, primarily oil and gas. Much like the energy income trusts, that we used to have in Canada before the tax loophole was closed in 2011, MLPs are allowed to pass their income to their unitholders without paying much tax. This distribution means that unitholders are responsible for paying ...
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