Master Limited Partnership - MLP

Pronounced… Muhlp. So...this term came from Star Wars. Master Luke; Master Darth; Master...Bates. And it’s just an LLC…that is publicly traded. Like…every now and then in huge bull markets, an investment company goes public. A VC firm, a PE firm, THE Firm. And even more popular, MLPs help the energy sector do things more efficiently...and in fact, most MLPs live in and around the energy sector.

Most of them started out as small, dozen-member LLCs with limited partners who gave the general partners money to invest. Just like when they were private. And, as when they were private, profits weren’t taxed until they were distributed to the partners as cash. So then...why did they want to become a MLP in the first place?

Well, liquidity. The firm itself was doing really amazingly well, and each partner wanted to get cashed out at a big multiple of earnings...as if his seat in the partnership was worth being valued as a business, rather than just a product. That’s how the enormous mutual fund beast and merchant bank Blackstone started...and ended, as it is now a publicly traded behemoth.

Same deal with Franklin Funds, T. Rowe Price, and a bunch of other professional partnerships, which wanted its key partners to be able to get liquid, sell their holdings, and pay for divorces 1 and 2...and have dough left over for that convertible red Porsche with the upgraded wheel rims.

Also, a MLP doesn't pay taxes. Profits are passed through to the individual partners, who then pay ordinary income tax on whatever they get. So...that’s a MLP. And…so is this. Mutton, Lettuce, Pepperoni. Delicious.