LLC for Mobile Home Park Ownership?

Question

So we are purchasing our first small park soon.  What is the best way to own an Mobile Home Park?  We were looking at an LLC.  Is one LLC layer enough?  Should we have that LLC owned by something else?  Also are there different states that are better to have your LLC through?  Thanks for any advice!

Account Closed · Answer

The self-employment tax has more to do with how you run the property.  If you are working in the park, then you should be hit with this.  I've probably looked at well over a 1,000 parks since getting into this business three years ago.  I would say that of the parks owned in entities, 90+% of them are LLC's.  Of those 1,000 or so parks, I've only seen one where the owner took a salary and was subject to self-employment tax.  For this park, he got up every morning, drove to the park office and sat there 9-5.  He was his own employee.  As long as you don't do that (I hope you aren't planning to) you should be fine.

Account Closed · Answer

Clint's website got removed... you can look him up on-line and you can listen to him on a few podcasts that are out there.  He's very knowledgable on the subjects you are asking about.

Account Closed · Answer

Not a lawyer, Not a CPA.

Typically, you will want to hold the real estate separate from the park owned homes.  So, two LLCs are ideal, but not necessary.  It's just an extra separation and if this park only has a few POHs, I'm not sure I would even go through the hassle to separate them.  It may also be a good idea to employ your manager through a separate S-Corp, but again, I tdon't but others advise that it's a good idea.

You can layer it with another LLC and it might not be a bad idea for you and your partner to form an entity to hold an interest in this property and any others you may involve yourself with.  That way, you and your partner can hammer out a really good operating agreement on your holding company and keep it simple on each entity holding property.

Lastly, I would have the LLC holding the property in the state the property is located in.  You'll likely have to register the entity in that state anyways so just set it up there to save the extra paperwork.  For your holding LLC, you can set this up wherever you want.  I've heard WY is good but I'm not sure why.  Clint Coons should be able to help you answer that question.

Jeffrey H. · Answer

Certain states also have a "series" LLC, which is basically an LLC that allows self contained silos instead of having a large number of traditional LLC's.  Only some states allow it and in many cases must be specifically stated in the articles of incorporation.

I have one traditional LLC as a management company, and a separate series LLC for several properties as a subsidiary.  The silos or cells within a series LLC offer the same protection as having an individual LLC instead, so the management, tax reporting, etc is all simplified and cheaper.

So if I have an MHP and want a management LLC, a POH LLC, a real property LLC, etc, I can use my management LLC as a traditional one and a series LLC for the two Park entities to protect all 3 under this model with the same legal rigor as someone with 3 traditional LLC's.  As you add MHP's just add series as needed.

I don't think you would want 100 series in one of these as it would get messy and should separate for strategic organization, but once you're that big you have other priorities anyway.

Not sure if these are allowed in Indiana, talk to an attorney.  Congrats on your purchase!

Jackie Hook · Answer

Thank you everyone for your input.  We are very excited for purchasing our first park!

Ed Emmons · Answer

With llc the income can be subject to self employment tax. I have an  s Corp own my llc. For real protection a LP is best with corporation as general partner owning 1%. If you get sued and lose all the assets in that entity are vulnerable. So that is a guide if you need something separate because more liability then keep it separate.