Before You Invest in Oil & Gas Master Limited Partnerships
Ein entsprechender Bericht der Kommission wäre wünschenswert. Limited partners may also record a pro-rated share of the MLP's depreciation on their own tax forms to reduce liability.
This provides the general partner with an incentive to maximize distributions through pursuing income-producing acquisitions and organic growth projects. In addition to the traditional governance committees , an MLP often has a conflicts committee composed of two or more independent directors.
This committee reviews specific matters as authorized by the Board of Directors that may involve conflicts of interest. Because MLPs are not subject to corporate taxation , they act as pass-through entities. Limited partners may also record a pro-rated share of the MLP's depreciation on their own tax forms to reduce liability.
Because of the stringent provisions on MLPs and the nature of the quarterly required distributions, most MLPs operate oil, natural gas, or refined product pipeline businesses, which tend to generate more predictable income streams. However, many other assets can be operated in an MLP including processing plants, natural resource storage facilities, rail terminals, marine transportation vessels, and refineries, among others.
MLPs also operate in the propane, coal and biomass industries. Under the rents from real property provision of the tax code , companies operating cemeteries qualify to become MLPs. Additionally, the first generation of MLPs was grandfathered into the structure in the s when the incomes limits were strictly defined. From Wikipedia, the free encyclopedia. Retrieved July 19, Cramer Sorts Out the Confusion". Retrieved June 3, Retrieved from " https: Corporate finance Legal entities Types of business entity.
By and large, master limited partnerships are just that — limited partnerships that happen to be highly liquid, and tradable on U. Tax-wise, MLPs are treated differently from stocks and bonds, and are generally treated more favorably by the Internal Revenue Service. Taxes are paid by MLP unit-holders, on a pass-through basis. However, non Americans like Canadians, eh do face double taxation—there is a withholding tax by Uncle Sam and they are not part of the Canada US tax treaty.
All MLP investors should check with their tax accountants. The vast majority of MLPs invest in midstream oil and gas companies, primarily in the pipeline, storage and distribution sectors. Because some MLPs really do make that true — at least from a historical sense.
Since MLPs generally invest in relatively stable midstream energy companies — think pipelines, storage tanks, and oil and gas terminals — investors benefit from high demand for the services those midstream oil and gas companies provide. Master limited partnerships have proven resilient against down stock market cycles. In addition, exposure to small-cap oil and gas stocks — a common investment for MLPs — can lead to higher-than-normal volatility.
Some master limited partnerships are riskier than others. Larger pipelines are also difficult to replace, making them more valuable for MLP investors. Since natural gas is more vulnerable to commodity price fluctuations, MLP investors should proceed with caution when it comes to evaluating various MLP investments.
That demand will generate big revenues to MLPs, who are expected to provide that entire infrastructure. In turn, those revenues should fatten up distributions, and boost MLP performance for years — and maybe even decades to come. In fact, the U. As a result, MLPs must file annual and quarterly reports, and keep investors apprised of any changes to its business model, and any developments that may impact the MLP.