Just over three years ago, entities known as Master Limited Partnerships (MLPs) were devised primarily as corporate entities which own and operate certain energy enterprises. Able to be traded on public exchanges, the partnerships provide those who own interests in them to have a high degree of liquidity but avoid the tax consequences of paying taxes at a corporate rate. The gains that each of the limited partners accrue can be treated as ordinary income and the regular depreciation of assets owned by the MLP can be declared to offset such taxable gains.
As these MLPs only apply to enterprises that engage in certain businesses, mostly pertaining to the use of natural resources, such as petroleum and natural gas extraction and transportation, they are only available to investors in companies that devote, according to the IRS, 90 percent of their activities to such endeavors. Nevertheless, the use of this type of investment structure has flourished as a result of the energy boom taking place in the Gulf and other parts of our country. Investors, in the form of limited partners, do not have to worry about the whims of shareholders and are prohibited from exercising any operational control over MLPs affairs. In many of these enterprises, such as the construction and maintenance of oil pipelines, the regular stream of revenue that such endeavors generate, provides the chance for recovering profits in the form of steady quarterly or annual distributions.
MLPs are merely one of many forms of corporate entities which changing laws and regulations allow investors and entrepreneurs to use. Businesses in New Mexico can choose from a myriad of business entities involving corporations, partnerships and limited liability companies. To determine which type of entity best fits the needs of your business, get in touch with an Albuquerque business law firm. George “Dave” Giddens at Giddens & Gatton Law,amp; P.C. has experience advising New Mexico business owners as to which corporate entity will best serve their company’s needs. Giddens & Gatton Law,amp; P.C. is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico. Call the office at (505) 273-3720 to set up an appointment or visit the firm’s website at giddenslaw.com for more information.