Flipping Business and Rentals....Different LLCs?

[Dustin Erlewine]

I am looking to meet with my account and figure out how I can avoid Uncle Sam's wrath. I want a LLCs for my rentals, however should my flipping business be a separate LLC or the same? I market to houses with my business name which I have registered, and I'd like to have an LLC for it. However, I don't know how that would benefit me. I'm trying to figure out where the lines are for my flipping business and rentals. Some of the expenses would be part of the rehab for the rental, where marketing wouldn't be. Any guidance?

[Bob Okenwa]

This is something that should also be brought up to your accountant. Flipping is taxed as earned/active income and rentals are passive income.

The IRS classifies individuals who actively purchase and remodel real estate for profit on a continuing basis as dealers rather than investors. For these people, the real estate is treated as inventory, rather than capital assets, and the profits on the sale of those properties is treated as ordinary income and is subject to the self-employment tax.