Getting started - Form a Inc vs LLC ?

[Scott Schaeffer]

We are based in Mississippi and was wondering if anyone had any thoughts or ideas regarding how best to form our business entity - Inc. or LLC ? THANKS & have a great week! Scott

[Jeff Sheraton]

I am not a CPA, but my CPA explained to me that LLC's should be used for passive investments like rental property and corporations should be used for active income like flipping houses, management companies, ect.

The big advantage of the corporation is that you can take your income in two different ways.  One way will be wages, subject to self employment tax.  The other will be dividends which are not subject to sell employment tax.  

Because rental income is all passive it is never subject to self employment tax so it can just run through an LLC. If your flipping business was in an LLC you could end up paying self employment tax on all earnings.

Definitely confirm all of this with your CPA.