Tax implications of seller financing properties and business structure

[Luke Moore]

I was listening to a podcast this morning and the hosts were discussing the origination of a seller financed loan on property that they own to either hold or sell as a performing note. 

I have a rental property that has substantial equity, but raising taxes, insurance, and expenses are squeezing my margin. I was thinking about selling the rental through 1031 exchange into a lesser valued property and originating a seller financed loan to get on the other side of the deal. What are the tax implications of this type of transaction if I hold the note vs. sell the note, and how do I best manage this? LLC, S-Corp? Any advice with this type of transaction?