Fix + Flip LLC Manager / Member Salary Structure

[Vanessa Jauregui]

Hi all. I am forming a manager-managed LLC taxed as an S-Corp for fix and flips with myself as the manager. My family member and I will be investing together in the properties and they will share part of the profit. To reduce taxes owed on profit, should my family member be a member of the LLC and earn profit through the LLC, or should I pay them as an employee and provide them with a W-2? Does it matter?

The goal being to keep from having to pay large amounts of tax on the profits that don't get reinvested in a 1031-Exchange.

Help much appreciated.