MLPs possess unique governance characteristics as compared to corporations.The number of master limited partnerships (MLPs) has grown significantly over the past five years, increasing from 59 in 2009 to over 100 in 2013. An MLP is a partnership or limited liability company that is traded on a stock exchange. In contrast to corporations, partnerships generally do not pay federal income tax at the entity level. However, publicly traded partnerships are taxed as corporations unless 90 percent of the gross income is “qualifying income.” The most prominent category of qualifying income relates to natural resources activities.

This article examines the unique governance characteristics of MLPs.

1. General Structure An MLP has both limited partners and a general partner. The general partner possesses the exclusive management powers over the business and affairs of the MLP and the Board of Directors is typically at this level. Directors owe duties to the MLP and all of its unitholders (including the sponsor) under the MLP’s partnership agreement.