What is a Unitholder?
A unitholder is an investor who owns the securities of a trust, like a real estate investment trust (REIT) or a master limited partnership (MLP). The securities issued by trusts and MLPs are called units, and investors in units are called unitholders.
How Does a Unitholder Work?
Certain types of trusts and MLPs can be bought and sold on U.S. stock exchanges just like stocks. But instead of purchasing the shares of companies and becoming shareholders, investors in trusts purchase units and become unitholders.
Why Does a Unitholder Matter?
Unitholders and shareholders have different names because each is holding a different type of asset and has a different set of rights. For example, though unitholders possess some voting rights, those rights are often more limited than those of corporate shareholders.
Another difference is in the tax treatment of distributions made to unitholders versus shareholders. Distributions received by unitholders are designated as pass-through income. Pass-through income has not been taxed at the company level -- it is only taxed at the individual level. Shareholders receive dividends out of income that has already been taxed at the corporate level, and then shareholders must pay individual income tax on top of that, leading to the controversial event known as double taxation.
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
The dumbest investing mistake I ever made was opening a Roth IRA account. It seems like a smart decision, right? Set up an account that...Read More →
Many of us wish for less complexity in our lives. From relationships to finances, we crave simplicity. But life doesn't really allow for that most of the time. You're juggling your...Read More →