For investing purposes, MLPs and LLCs can be a great way to maximize the amount of cash that can be paid to investors, because these organizational structures don't pay income tax, but pass that burden along to those who are invested in it. The same goes for some trust structures.
In other words, because these entities don't pay corporate taxes, the full burden falls on those receiving income from them. This differs from dividend income paid to shareholders by a typical corporation in that regular dividends are taxed as long-term capital gains, while much of the income paid and shown on a Schedule K-1 can be classified as regular income. That means it's taxed at your effective income-tax rate, which is often much higher than the 15% or 20% long-term capital gains rate for corporate dividends.
In summary, a Schedule K-1 issuing entity may be able to pass more income along to you, the investor, but you may end up giving more of it back in taxes than if you'd received regular dividends from a corporation. It really boils down to your tax rate, and how much more income the LLC, MLP, or trust is able to pay.
In order to have less effort with your portfolio allocation and your investment, you could avoid such stocks with K-1 schedules.
Nevertheless, if you like to invest into stocks with a master limited status, you could look at the following list. Each of the stocks are MLP's with status Partnership "C" corporation. Those companies create a classical 1099 Filling and don't send you K-1's.
Here is the list...enjoy it and share it with your social friends...
|20 MLPs To Get Money From Without Filling A K1 |
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|20 MLPs With a 1099 Filling|
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