I am about to start due diligence on my first park… 30 lot park in South Carolina. 100% occupancy, 4 POHs.As I understand it, Frank and Dave have an asset protection strategy that includes 1. An S-Corp, 2. an LLC for the land, 3. an LLC for the POHs.As a first time MHP buyer, what is the best (and budget friendly) way for me to set up my legal entity/entities/protection? Ideally, I guess I should set it up it the way Frank and Dave do it. Or is there a cheaper/simpler way for a small operator to do it?Thanks.
The cheapest and easiest way to protect your self is to have adequate insurance coverage.
I do it the “Frank and Dave” way but if I were you I would set up the whole thing in one LLC in the state of the real property, and get a closing attorney in that state to look over the purchase contract and someone to look over your leases (maybe through the state MHA). Treat your company as its own thing and don’t mingle and it will all be okay.Brandon@Sandell
The best asset protection plan is to 1) be proactive you have no risks (make sure there are no dangerous breeds of dogs, no open manholes, no uneven sidewalks, etc.) and 2) carry a ton of insurance. If you do not know what your exposures are to watch out for, Kurt Kelley can tell you.As far as structure, all parks need to be in a stand-alone LLC – that’s the requirement of most professional MH lenders (like conduit and most big banks). How you then own that LLC is up to you, but often it is in a partnership, so there is then another entity that owns that entity. You typically also have a management company that runs the park – this is, again, the structure that is mandated by lenders, and is not an “asset protection” formula.We have been in business for 20 years and never had a liability claim that went to court. That’s because we proactively watch out for risks and carry lots of insurance, which settles any legitimate claim for a low cost (and no cost to us). I will also point out that if you actively eliminate risks in your park, the cases that do pop up are normally very small in nature and no big deal. The park owner that has open electrical boxes, open water meter boxes, dangerous breeds of dogs on the loose – the typical thing we see all the time when we drive through parks we are looking at buying – he’s the guy that really needs an asset protection plan. I can’t emphasize enough that what’s vital is managing your risk and carrying significant insurance ($1 million to $5 million per occurrence). If you have succeeded in those two arenas, then any asset formation plan is not that big an issue.
Thanks for the feedback, but I still do not know what to do? Should I:1. Form an LLC in South Carolina, and put the park (land) in it.2. Form another LLC for the POHs, even though there are only 4 POHs? In which State should I form this LLC? Probably South Carolina right?3. Form an S-Corp. Where should I form the S-Corp? I would like to use a lawyer to do all of this for us from A - Z, but the cost is almost incomprehensible. Please feast your eyes on this fee schedule (page 14) of a lawyer (South Carolina) who has a fee match guarantee, so I guess he is asking near market prices. http://www.hiltonheadestateplanning.com/images/PackageForNEWorPROSPECTIVEClient_Married_-2015.pdfPS: The park is in South Carolina, and my wife and I live in Florida. I have submitted a request for an insurance quote to Kurt Kelly.
The fees listed are not out of line and well worth the expense. You need to get yourself a lawyer if you intend to operate your business right so start now. He will answer all your questions.
Where is your park in SC?
We have one in Hartsville.
The lot rents are a little low but demand is incredible and people even move their own homes into the park.
It would be interesting to know at what point others recommend setting up a separate LLC for the homes.
@BrianZ, the park is in Woodruff, SC. Lot rent = $160, it hasn’t been increased since 2009. How much is your lot rent in Hartsville?
GJS, my Husband and I own 2 MHPs in South Carolina. We have a great Attorney who created an LLC for us and closed on one of our MHPs. We had previously used an Accountant to create an LLC and the Attorney advised strongly against that.I noticed that your quote was from an Estate Planning Attorney out of Hilton Head. Hilton Head is a pretty high priced area with high net worth Clients. Thus, they are probably able to charge more than another Attorney outside of the Hilton Head area.The price of $320 Per Hour for the Primary Attorney seems a bit high (at least for our area). We are more around $250 Per Hour for the Primary Attorney. However, if this Attorney has created a lot of LLCs and knows how to protect you, it would be worth it.Also, do you specifically need an Estate Attorney?I would recommend more of a Corporate Attorney or Real Estate Attorney located out of the Hilton Head area.We wish you the very best!
Gjs my lot rent is only at 125 now. When I had taken it over it was at 100. The previous owner hadnt raised it. The park was owned by a local family for like 40 years. I own it now for one year. We will go up another $15 this year. I should really be around 150-160 but thought it would be too much all at once. I know many people on here would go up all at once. The good part is I have had four tenants move their own homes into the park.
@Kristin, thanks Kristin! Did your attorney set it up like this?- the park and POHs are all in one LLC?- you and your husband are managing members of the LLC? - do you have an operating agreement for the LLC?- do you also have an S-Corp?Could you please share the contact details of your attorney? We wish you all the best too
@BrianZ, I am thinking of raising the rent to $180 as soon as I take over the park, but first I have to get comps on the surrounding parks.
GJS, below are the answers to your questions:Did your attorney set it up like this? The Park and POHs are all in one LLC? - Yes, we have one LLC for each MHP and for the Park Owned Mobile Homes in that MHP. We set these up before going to Boot Camp with Frank. In the future we hope to have 4 LLCs with one for each MHP and one for each group of MHs for each MHP. Thus, we would advise having a LLC for your MHP and another LLC for your Park Owned Homes.- you and your husband are managing members of the LLC? No, my Husband is a Single Member LLC.- do you have an operating agreement for the LLC?Yes, we have an Operating Agreement for the LLC.- do you also have an S-Corp?No, not now. However, we hope to restructure our Business setup (with a S-Corp) in the near future.Could you please share the contact details of your attorney?- Sure thing. I will send you a message with the Attorney’s Contact info. Now we are in a different part of the state of SC than your MHP. If you desire to use the same Attorney for the Real Estate Closing and for creating a LLC, I would suggest finding one in the area of your MHP. When deciding upon a name for your LLC, you can go to the SC Secretary Of State’s Website and see if the name has already been used. The website is:http://www.sos.sc.gov/Search%20Business%20FilingsWe wish you the very best!
@Kristin, thank you very much Kristin!