The Master Limited Partnership: A Hybrid Structure for Natural Resource Firms

Businesses constantly seek innovative ways to structure their operations in order to take advantage of the best attributes of both a corporation and a flow-through (partnership) form. Traditionally, the partnership form has provided the greatest tax advantages of the two forms: the flow-through of gain and income items to partners in lower tax brackets, as well as the avoidance of double taxation on corporate payouts to owners. "Master limited partnership" (MLP) and "publicly traded partnership" (PTP) are terms that are generally used interchangeably to describe this type of business entity. However, their definitions are different. Publicly traded partnerships are exactly what their name indicates: partnerships in which interests in the partnership are traded on an established securities market, such as NASDAQ or the New York Stock Exchange. As a result of this access to capital market, PTPs have significantly more partners than a normal, non-publicly traded partnership.