Passive investor in flipping and self employment tax

[Giedrius C.]

I will be a passive investor who will finance the flip and my partner will do all the work and we will split profits according to our agreement.

My preferable way would be to buy it in the name of the LLC I own 100%, my partner will deal with contractors and does all the work needed, my LLC pays for everything, we sell the property and my LLC pays my partner agreed percentage of the profits as a project management fee.

Can I treat the income from such an activity as passive and avoid self employment tax? As I understand I could for sure if I lent the money or we formed formal partnership where I was a passive partner, but what about the arrangement I described above? I prefer it because it gives me full control of the asset, it doesn't require any extra entities that need separate accounting and simplifies buying and selling, because property is free and clear. But if that gets me in trouble with self employment tax, I need to reconsider. 

Thanks for ideas.

[Eamonn McElroy]

IRC Sec 1402 and the related regs (dealing with income subject to SE taxes), neither reference nor depend on IRC Sec 469 (dealing with passive activity loss rules).  It's completely possible that a trade or business which is passive to an individual will also be subject to SE taxes, which makes conversation with a competent professional and tax entity structuring all the more valuable.

Not as much of a fan of S Corps in the wake of the TCJA as I used to be.  Like Michael noted, this is a decision to be made with a professional.

"but according to my accountant, and superficial research I did online, if you do this when there are no other employees, you are asking for an audit"

At face value, this is incorrect.