Should I be an S-Corp for flipping?

[Ben Hudman]

Hello! We currently have three houses that we are in the process of flipping. I was wondering if I should file the form to make my LLC be taxed as an S-Corp? I see varying answers to this question. My main goal is to try to get out of paying the self employment tax. Any advice helps!

[Eamonn McElroy]

@Ben Hudman

An S Corp can't get you out of paying SE taxes.  Only a C Corp can do that.  Although your effective tax rate will most likely be higher with a C Corp...AND you wouldn't be paying into SS.  Whether that matters to you or not is another issue.

An S Corp is designed to minimize SE taxes based on "reasonable compensation", which will vary for each and every taxpayer.  There is not a set percentage.

The decision is qualitative just as much as quantitative.  Some people don't want to deal with the extra tax return and run payroll for an S Corp vs a Disregarded Entity/Sole Prop, even when material tax savings is involved.

Good for a discussion with your tax pro.