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Understanding Master Limited Partnership: A Comprehensive Legal Overview
Definition & Meaning
A master limited partnership (MLP) is a type of limited partnership that is publicly traded. It typically combines several individual limited partnerships into a larger entity, often in sectors like real estate or oil and gas. This structure makes ownership interests more accessible and marketable to investors.
Most MLPs focus on businesses related to oil and gas, including energy processing and distribution. However, they can also encompass other industries such as coal, timber, and real estate. MLPs usually trade on major stock exchanges, like the New York Stock Exchange.
One key feature of MLPs is that they are considered pass-through entities for tax purposes. This means that they are not taxed at the partnership level; instead, taxes are passed on to the individual unitholders who report them on their personal tax returns.
Table of content
Legal Use & context
Master limited partnerships are primarily used in business and investment contexts. They are significant in the fields of corporate law and tax law. Legal professionals may deal with MLPs when advising clients on investment opportunities, structuring partnerships, or navigating tax implications.
Individuals can manage certain aspects of MLPs themselves, especially when using legal templates and forms available through platforms like US Legal Forms. This can include setting up the partnership agreement or managing tax documentation.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: An MLP in the oil and gas sector might own and operate pipelines for transporting crude oil. Investors can buy units in the MLP, receiving distributions from the profits generated by the pipeline operations.
Example 2: A real estate MLP may own a portfolio of commercial properties, allowing investors to share in the rental income and appreciation of the properties. (hypothetical example)
State-by-state differences
Examples of state differences (not exhaustive):
State
Key Differences
Texas
Home to many oil and gas MLPs, with specific regulations governing their formation and operation.
California
More stringent environmental regulations may affect MLPs involved in energy sectors.
New York
Regulations may differ regarding the taxation of MLPs and investor protections.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Key Differences
Limited Partnership
A partnership with at least one general partner and one limited partner.
Not publicly traded; limited partners have less control.
General Partnership
A partnership where all partners share management and profits.
All partners have unlimited liability; not pass-through for tax purposes.
Common misunderstandings
What to do if this term applies to you
If you are considering investing in a master limited partnership or are involved in one, it's essential to understand the structure and tax implications. You can start by reviewing available legal forms and templates through US Legal Forms to assist with partnership agreements or tax documentation.
If your situation is complex, consulting a legal professional is advisable to ensure compliance with relevant laws and regulations.
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