The current issue of the Economist has two interesting pieces (here and here) detailing forms of business that are acquiring prominence in the US markets and posing a challenge to the dominance of corporations (or companies) as the main form of business vehicle. Referring to this phenomenon as “distorporation”, it primarily alludes to the master limited partnership (MLP).
The details are described as follows:
The “master limited partnership” (MLP) combines the limited liability of a corporation, the tax advantages of a partnership and the governance of a private firm. MLPs do not pay corporate taxes so long as profits are passed on to investors each year. They also pay less attention to shareholder rights. A tidal wave of capital is washing towards these and other, similar “pass-through” structures ... Together, they represent a mere 9% of the number of listed companies in America, but in 2012 they took in 28% of the equity raised on public markets and paid one-third of Wall Street fees.
There are two key drivers behind the emergence of these types of vehicles. First, they minimize the tax burden. Second, they do not fall within the purview of details rules regarding corporate law and governance. While this facilitates the establishment of businesses more efficiently, there could be issues regarding loss of revenue and limited protection to minority investors.