I am the son of an owner of a mobile home park in California. As my mom is getting older and nearing retirement, I am becoming more involved in the operations of the park.
For the past 40 years or so, she has operated the park without an LLC. Tenants write checks directly to her and have access to her home phone number. This has always struck me as a bizarre dynamic and an explicit invasion of privacy. Tenants routinely call her at all times of day and night, complaining about the manager, and pestering her with petty problems.
It appears to me that the LLC would provide some degree of anonymity as well as potentially protecting her personal assets. She is adamantly resistant to this change without being able to actually explain why – am I wrong to assume that the LLC is advantageous? Is there something she would lose by incorporating?
I have had and have LLCs in CA, IL, SD, NE, NM, NY. CA is the worst - $800/year. And what do you get for it? Not much. Think about it; for it to save your other assets from a judgment you would have to have done something so harmful to someone that they they are owed more than the equity in your park and all your insurance. In most cases that would be in the millions. If you harmed someone that much do you really think a judge will allow you to hide your other assets behind an LLC? Not likely. Judges can and do set them aside.
If you want to remain anonymous, you can just do a DBA and you don’t need a registered agent or do a file an annual report or pay an annual tax. Take that $800 and beef up your insurance.
Andrew’s advice is very uninformed. Go to YouTube and search “Clint Coons real estate”. There you will find a lot of free videos by a very good real estate attorney. You will learn that Andrew has no idea what’s he’s talking about.
Your mom is one slip and fall or other accident on her property away from losing everything she owns.
$800 is very cheap insurance and piercing the LLC veil is tough to do without paying an attorney more than it’s worth.
Hummm…a slip and fall case that is big enough to exceed your insurance, which should be at least a million and take everything you own on top of that, but is not big enough to ask the court for the LLC to be set aside. Yeah, right, that makes a lot of sense.
BTW, I work with a lot of attorneys. I have brought up this issue with a couple of them. They all say a LLC is a good idea. But when pressed, they told me what I suspected; that if the case was serious enough to warrant the protection of an LLC, that is to say the damage you caused is in the seven figures, if it is a single member LLC, it will provide no protection. OK then if it does nothing in such a situation then in what situation is it of use? They had no answer for that.
I agree with Jackary - spend the $800. I live in CA and I do. Consult an attorney, or two or three, and ask them what they think about LLC’s and what their experience is relating to what AndrewD heard from the attorneys works with. Then form your own decision.