Hi all,I purchased a two-unit home a few years ago as my primary residence with a conventional loan, and was told by an accountant that there is no reporting or extra tax forms I need to file as long as my tenant in the upstairs unit is paying less than the total of my mortgage.

It will be done correctly every month and during tax time, you and your partners can easily have to CPA/book keeper issue 1099's and get your taxes filed on time with all the right deductions.

I wrote an entire post on how to file your tax returns that so that they are more friendly to lenders you can read HERE. 

HOWEVER, want to avoid/minimize setting up a new company and filing additional LLC and other related documents (want to avoid extra work additional docs would create). 

This means you have an LLC for a single business activity, which is filed correctly, has an Operating Agreement with clear and precise terms, you set up a separate bank account for that LLC and its related business activity, you do not use that bank account in any way for personal activity, and while it varies per state as being a requirement, you always want to make sure you have periodic filings and to take it even further, hold a "meeting" once a year...even if you're the sole member and there's not much changes that took place for the year. 

If those conditions aren't met, you'd have to file an unlawful detainer action assuming the occupant doesn't have any claim as an owner or tenant.

My attorney refers to that as a filing cabinet entity.

You lead the call explaining that you run lists and know these are wrong all the time (so you don't make them feel bad to start), but this list said their may have been a list pendens filed at some point and it probably got resolved, but you wanted to check.

Has the manager ever filed for bankruptcy?

If so I would file a warranty claim for a new one.