Many Mobile Home Parks seem to be run under a LLC. Is there any advantage to incorporating or is an LLC sufficient?
Glenn,selecting the best assert ownership vehicle involves considering many factors and nearly all of the factors are state specific.
I do not believe you ever want to own real estate as a C-Corp. At least not at the level of the casual investor. An LLC is a pass through corp, so there are many advantages form a tax, and liability standpoint in owning through an LLC or a LP.
I structure like this-
I own a S Corp that manages all of my investments.
I own an LLC- it is my park ownership LLC- let call it ‘Ownership LLC’
I buy a park and create a new LLC to own the park- cal it ‘Park LLC’
So- ownership llc, is the managing member of park llc.
Park LLC hires S Corp- to manage the park.
S Corp manages many parks, and other investments. and pays for my insurance etc…
So- I use both the LLC as the ownership part, and the S Corp as the management part.
I agree with Jim - particularly with regard to the C Corporation. They can force you to pay additional taxes whenever you buy or sell the assets the C Corp owns. I once bought a company that was a C Corp. That deal would have completely fallen to pieces due to crippling tax consequences for the sellers if I hadn’t been flexible and we didn’t have some real smart CPA/Lawyers involved. C Corp’s are a good idea if you’ll have a huge number of investors and plan to have extensive and sophisticated operations. Otherwise, I’d avoid them, absent an express recommendation to have one by your CPA.
An S Corp and an LLC are alike in two key ways. Both allow asset protection and pass through taxation (only one level of income tax). The reason more have an LLC than an S Corp is because an LLC is a little easier to create and it’s not required that you have annual shareholder and directors meetings, or keep formal records on such. For most of us who own investment real estate, the LLC is the best way to go. I’d call it the modern day S Corp. Ask your CPA what’s the best option for you.