I am under contract to purchase a park in a different state from where I live. Wondering if I need to setup an LLC in the state where the park resides or can I setup an LLC in my home state and use it to conduct business in another state?Also, the park has a fair number of park owned homes and I want to confirm that it is recommended to setup an LLC for the park itself and another LLC for the park owned homes?Thanks for the help,Greg
You can set up your LLCs either where you live, or where the park is. I’d pick whichever is the least expensive state. And yes, it is better to set up separate LLCs for the real estate and the 'wheel estate.'Best,-jl-
I’m going to disagree with Jefferson here (which is unusual). I think you should definitely pick the state of the real property. I would have a hard time explaining why, concisely, but the venue of any lawsuit is bound to be in that state (because who is going to be suing you?) The state is going to be trying to protect its residents versus an out-of-state landlord, so at least you want to be the “in-state” landlord. You will also be bound by that state’s law no matter where your LLC is formed.I would do two LLC’s, one for the real property and one for the homes. If you keep the accounting separate in your books it will help you at the time of refinance, as well as providing some liability protection. That is, you might “lose” as much as the homes but not the park, in some cases, or vice-versa in other cases, which is bad but you would at least still have some leverage with the insurance company or lawyers.Brandon@Sandell
I agree with Brandon. The protection from liability that is afforded by LLC status is a grant from the individual state and requires registration with the Secretary of State or equivalent. Registration of an LLC as a “foreign entity” is required if the LLC is formed under the laws of another state. Failure to follow the procedures exactly might eliminate the protections whereas formation in the state of the asset establishes the protections without this extra step.Of course, the entity has to follow all the requirements of Membership, reporting, and whatever else the state requires or else the “corporate veil” could be pierced and individual liability re-established.Howard
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After talking with several accountants we decided to do the LLC in the state where the parks are located. One question is, do you ask your tenants to submit two checks for the lot rent and home rent or just one check and ask your manager transfer the home rent amount to the homes LLC account? Currently we are doing the later option. Just wondering if there is an easier way to manage this.
I’m all ears on this because I’m in a similar situation… To add to this, is there a reason why some park owners create an S-corp? And how much of the profit from the LLC(s) is paid to the S-corp? Lastly, is income from lot rent subject to social security tax?
DallasMHP, you indicated that you spoke to several Accountants and that you decided to create the LLC in the state where the MHP is located.I agree that the LLC should be in the same state where the MHP is located.However, I have an additional question.Who created your LLC (Accountant, Attorney Or Another Entity)?We have had several LLCs created. The first LLCs were created by an Accountant. We then had an Attorney tell us that we should always have an Attorney create a LLC for us, which we did for our MHPs. If you had an Accountant create your LLC/s, you might just want an Attorney to look over LLC/s to make sure that they are correct.We wish you the very best!
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It is almost always best to set up an LLC in the state where the real property is located. If you set up an LLC in another state, it will still have to file as a foreign entity in the state where the property is located, and as a result it will be subject to the same fees, the same reporting requirements, and it will have to have a registered agent there as well. So you will end up paying double indemnity if you set it up anywhere other than the state where the property is located. If you have multiple properties, each of which is owned by a unique LLC incorporated in the same state as the property in question, you may opt to have those various LLCs owned by a master LLC, which you can set up either in your home state or in a state like Delaware, Wyoming, or Nevada, all of which offer a fairly high degree of privacy.An LLC has more flexibility than an S-Corp, and also requires fewer formalities. Both offer the same amount of liability protection, provided that the entity in question is not considered an “alter ego” of the owner. That can be ensured simply by maintaining proper documentation, keeping appropriate minutes of member meetings, not co-mingling personal finances with the entity, etc.Having a lawyer set up an LLC is usually overkill. Lawyers will advise this because, well, it generates lawyer fees. The only time I would have a lawyer set it up is if you have multiple members, multiple classes of membership interests (stock), or other complexities with third parties that you would want a lawyer to review.To your continued success…
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