Offshore MLPs can provide a tax efficient vehicle for investors, but only if structured properly.

A master limited partnership (MLP) is a partnership or limited liability company traded on a stock exchange that generally does not pay federal income tax at the entity level. Some MLPs with assets in non-US jurisdictions are organized as partnerships or limited liability companies but elect to be treated as corporations for US federal income tax purposes. Currently, eight MLPs are treated as corporations for US federal income tax purposes and derive much of their income from offshore assets.

Offshore MLPs differ from other MLPs because of the following characteristics:

1. Offshore MLPs are typically organized as Marshall Islands limited partnerships or limited liability companies. The Marshall Islands laws governing limited partnerships and limited liabilities companies are substantially similar to the laws of the state of Delaware. In addition, the Marshall Islands does not impose any meaningful entity level tax on these entities...