The Basics of Master Limited Partnerships - dummies

The Basics of Master Limited Partnerships

By Amine Bouchentouf

If you’re interested in investing in companies that are involved in the production, transformation, and distribution of commodities, one of the best ways to do so is to invest in a master limited partnership (MLP). MLPs are a great investment because of their tax advantage and high cash payouts.

MLPs are public entities that trade on public exchanges. Just as a company issues stock on an exchange, an MLP issues shares that trade on an exchange. You can get involved in an MLP by simply purchasing its shares on an exchange. This is why an MLP is also called a publicly traded partnership (PTP).

Although most MLPs trade on the New York Stock Exchange (NYSE), a few MLPs also trade on the Nasdaq National Market (NASDAQ) and the American Stock and Options Exchange (AMEX).

The shares that an MLP issues are called units, and investors who own these units are known as unit holders. When you invest in an MLP, you’re essentially investing in a public partnership. This partnership is run by a general partner for his benefit and, more important, for that of the limited partners (which you become when you buy MLP units).