Posted by John K Haslach, CPA, MST on January 27, 2007 at 16:11:41:
If you are flipping, the income may be considered ordinary income subject to self employment tax (se tax). Running that income though an S Corp will keep it from being subject to se tax. However, upon audit, the IRS could deem it all to be salary subject to social security taxes, the equivalent of se tax.
If the flipping ordinary income was run through an LLC, the income would most likely be subject to se tax.
Rental real estate income is never subject se tax, so the properties can be held in an LLC taxed as a partnership.
Remember to elect to have your Corporation taxed as an S Corporation and check out the state and local taxes.