What is Master Limited Partnership?
Master Limited Partnership is a specific type of business settings. These are limited partnerships whose shares are publicly traded. This setting is only allowed in specific areas of industry. It differs from the corporation that the company is not an independent legal entity and therefore the owners are responsible for any debts. With this compilation, however, this liability is limited to the value of each partner in the business. In fact, this means they can't lose more than the money they put in business. This means that they are listed on the stock market, usually on the stock market. This can be the main advantage for business because it is much easier to obtain capital by selling ownership.
Another advantage of Master Limited Partnership is that it is not classified as a corporation for tax purposes in the United States. This means that they will not have to pay taxes on the income of legal entities, nor federally or to the state. This avoids the situation with double tax in most corporationswhere the company pays taxes on its profits and then shareholders pay dividends taxes.
strictly, the ownership share of each partner is not in the form of shares. Instead, it is known as a unit, with owners known as unit holders. Profit payments are known as distribution rather than dividends. There is also a distinction between general partners who run business day to day and limited partners who are simply investors in the company.
As regards the distribution of profits, most of the Master Limited partnership is working on a model that is not common in other business reports. Usually, municipal partners will use a small part of business, often 2%. This means that from the first dollar paid for distributions, two cents will go to general partners and 98 cents limited partners, as with dividends in corporation. Usually there is a sliding scale, which is knownThe greater the amount is the total amount paid for distributions, the greater the share of the operational partners. In some cases, operating partners can get up to half of the distribution.
Not all businesses can be established as a Master Limited partnership. US law limits it to a specific industry. As a gross rule, the company must obtain at least 90% of its revenue from commodities, real estate or natural resources to qualify.