The Master limited partnership is that little known rising star asset that has created quite a buzz off late. Again, a very few investors at least for those in the know investors have actually heard of the MLPs. You are ahead of the rush that will surely come toward MLPs by reading this. Jay Hatfield is one of the best companies to invest in. Alerian MLP is another such company. MLP ETF has gone to become one of the most favorite of the potential investors. This sector is all the more alluring due to the fact that it is exempted from all the taxes that are usually paid by the corporate offices.
The basics of Master Limited Partnership.
Just what the name implies, the partners in the public company are limited or called as units. The MLP ownership is thus not measured in shares as with stocks. There are quarterly income payments called the distributions and not the dividends and they are usually 80-90% tax free. This is because as a partner you get to share income and expense elimination. The depreciation allows 80-90% of the income payments to be received from a typical MLP. It is considered to be a return of capital by the named IRS. This means you will not have to pay taxes immediately on that 80-90% of the income and the rest 10 or 20% will be taxed at your normal income rate.
Stock exchange possibilities of Master limited partnership.
The tax hassle is worth the benefits as many MLPs help you earn over 10% on your money in quarterly distribution. The unit price is like a rising stock, adding even more to the yield. Any well known tax software will walk you through the whole tax issue quickly. The MLPs send K-1 tax forms around March 15 and the MLPs trade on the major exchanges just like any other stock exchange. These could be purchased easily through online discount broker as with any other stock.
However, getting information on these can be a bit of difficult as of now as this sector is still evolving.