What Is a Master Limited Partnership?

By Matthew DiLallo – Updated Jul 3, 2025 at 12:09 AM

Key Points

MLPs offer tax advantages as they pass profits and losses directly to investors.
Investors receive high quarterly cash distributions, aiding in income generation.
Buying and selling MLP units is easy via brokerage accounts during market hours.

Master limited partnerships (MLPs) are entities that combine the tax benefits of a private partnership with the liquidity advantages of a stock. MLPs don't pay taxes at the federal level. Instead, they pass through income, losses, and deductions to their investors. MLPs often make lucrative cash distributions to their LP investors, making them attractive income investments.

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An infographic defining and explaining master limited partnerships (MLPs). — Image source: The Motley Fool

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Publicly Traded Company

A company that issues shares that are publicly traded, meaning the shares are available for anyone to buy and sell on the stock market.

Like real estate investment trusts (REITs), the IRS set strict criteria for MLPs to prevent companies from exploiting the structure. MLPs must get at least 90% of their income from qualifying sources. Qualifying income includes profits from the exploration, production, or transportation of natural resources or from real estate activities. Even though real estate companies can operate as MLPs, most utilize the REIT structure. Most MLPs are in the energy sector.

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About the Author

Matt DiLallo has been a contributing Motley Fool stock market analyst specializing in covering dividend-paying companies, particularly in the energy and REIT sectors, since 2012. He also covers pre-IPO companies, ETFs, and other investing topics. He holds an MBA from Liberty University.

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Matt DiLallo has positions in Enterprise Products Partners. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.