Best Business Entity for My Flipping Business?

[Ashley A Merk]

Hello everyone! I am getting myself more and more confused with each thing I read regarding which business entity is best for me. So here’s my situation..

I am about to graduate college and will be working in my field full time in order to be approved for a mortgage and financing to pay for renovations for my first flip. I am pretty handy and plan on doing a lot of the easier work myself, and I may try to get my contractor’s license (apparently very easy to get in NJ) to make things a bit easier as far as permits are concerned. Aside from a down payment on a home and money I can afford to take from my weekly pay, I will be probably paying for most things on credit for the first flip. My sister wants to get involved and will be helping by assisting me in whatever reno projects we can do ourselves (probably just painting, tiling, flooring, and basic stuff to save on labor) and by letting me use her good credit for finance options.

I'm hoping within 12-18 months, I will be able to quit my 9-5 and do this full time. I'm trying to be realistic and figure 2-3 flips in that period is attainable. My concern is taxation. Won't I get killed with taxes at the end of the year if I make, say 100k from these properties since they'll be treated as short term? Isn't the tax rate over 30%? Would setting up an LLC be the smartest route tax wise? I would like to be able to pay salaries to both me and my sister so that we have verifiable income once I leave my 9-5 job. I'd also like to avoid paying the government nearly 40% of my take-home, especially because I'll be putting so much time and work into these properties myself. Any suggestions? I've been researching this stuff for nearly 3 years now. I've been learning how to do different reno projects from watching and assisting in work being done in my parents house, watching shows on tv to learn some tips, shopping online for materials and learning the costs to get them done and installed, I have created a few extremely detailed budgets to familiarize myself with costs, I've studied a few areas I'm interested in and have been following their markets for years, and reading articles on different aspects of the business. I love diy and interior design and I would love to own a business, so it makes sense that this would be the career for me. I am just having A LOT of trouble understanding which business entity would work best for me and how to avoid being blindsided when tax time comes around. I guess I should've listened more in my business law and accounting classes! Any help and advice would be greatly appreciated!!!