Master Limited Partnership*

A master limited partnership is a publicly traded limited partnership that gives large numbers of investors a direct interest in a group of assets controlled by the project. MLP units, which trade like stock, can be a "liquid investment". But instead of the partnership paying taxes on its profits (like a corporation), each limited partner is responsible on his or her individual income tax for a proportional share of the MLP's profits. This means that although the investor avoids "double" taxes, since the MLP itself does not pay taxes, the investor may have to pay taxes on his proportional share of the MLP's income, even if the MLP does not distribute any cash.

MLP Advantages

• Reduced exposure to commodity price sensitivity.
• Suitable for income-oriented investors
• Greater cash flow distribution creates higher yields while curbing risk profile
• Delivers high tax-advantaged income stream
• Strong management teams can provide per-share growth opportunities, via acquisition and cost control, for additional investment upside
• Advantages of a partnership, liquidity of an exchange-listed public entity
• Capital-intensive asset base creates relatively high barriers to entry and curtails competition

*Definition from Business Encyclopedia