A Master Limited Partnership, or MLP, is a limited partnership that is publicly traded. There are two separate partners in every master limited partnership: a General Partner (GP) and a Limited Partner (LP). The GP runs the operations of the company and maintains the voting power. The LP provides the capital and reaps the benefits of the distribution payments.
The goal of MLPs is to distribute profits. Master Limited Partnerships by law must pass along the vast majority of what it earns to the Limited Partners. The GP receives a management fee as compensation for its efforts and expertise, and is often paid extra, as a type of incentive, when it is able to increase the distribution to the Limited Partners.
Shares of each mlp master limited partnership are often referred to as units. They're publicly traded and make up the vast majority of the partnership. The LP's stake is comprised of these units. MLPs, because of their distribution structure, typically lead to a need for a steady cash flow stream. Because of this, master limited partnerships are involved in sectors of business affected less by business cycles than others. So you'll see many MLPs in the energy sector, as an example.
People who want to get involved in an investment with the potential for high yields really should think about MLPs. They have tremendous tax benefits and their structure make it a terrific way to diversify a portfolio.
