Quite similar to REIT (Real Estate Investment Trusts) Master Limited Partnership does not need to pay any kind of income taxes. Like every regular stock change MLP’s have their own share trades on big stock exchanges. But, there is a small difference between REIT and MLP. If you are not familiar with MLP, then you should know that there is a general partner who runs the whole partnership, and there are individual investors who are known as limited partners. On the other hand, REITs are a corporation on a different level.
You will find several MLP partnerships who are ruling the stock exchange markets and few of them are supplying several types of services like, transportation, crude oil-marketing, and even water solutions. NGL Energy Partners is one of them. Another major energy infrastructure you are about to know that earns most of their cash flow from the same type of services is the Alerian MLP.
Benefits of Master Limited Partnerships
It is benefited with a special treatment from the tax department. All the individual investors or limited partners get their profits and income according to their ownership interest. They do not suffer from any kind of incomes taxes. But, to do so they have to qualify for tax benefit every year or 90% at least. Their income should come from natural resources like mining, timber or any energy production and from real estate.
Where they make their profits
General Partners
General partners usually control the MLPs, and they generally get their hands on the cash flow before that is distributed among the limited partners in a percentage. And that percentage earns the general partners at each quarter which can start at a very low rate. The percentage rate can be 5% and can even rise up to 45%-50% if the cash flow grows.
Real Estate
This is the second best place where MLPs make their real profits due to high diversities of groups. Investments mainly in mortgage revenue bonds and financing of apartments.
Crude Oil Pipeline
This is where operators get most of their profits from and get the business into stability, so this is mainly their first priority.
You need to pick the right MLP if you are going to invest, you may end up having huge amount of profit and staying with them for a long time.
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