LLC vs. S-Corp for Miami Real-Estate Investors: Tax Savings Showdown

Real estate in Miami is booming, and investors are constantly looking for ways to protect their assets and save on taxes. Two of the most common business structures are the LLC (Limited Liability Company) and the S-Corp (S Corporation). Both can be excellent options, but the right choice depends on your goals, the type of income you earn, and how you plan to grow your portfolio.

Let’s break down the differences and see which structure might give you the edge in 2025.

Why Entity Choice Matters for Investors

When you invest in real estate, choosing the right entity affects more than just liability protection. It also shapes:

• How your rental or flip income is taxed
  
  
• What deductions and write-offs can you claim?
  
  
• Whether you owe self-employment taxes
  
  
• How profits are distributed to you and other investors
  
  

For Miami investors juggling multiple properties or considering long-term wealth strategies, the decision can make a big difference.

The Basics of an LLC

An LLC is one of the most flexible structures for real estate. It’s simple to set up in Florida, affordable, and offers liability protection—keeping your personal assets separate from your business liabilities.

Tax treatment of an LLC:

• By default, a single-member LLC is taxed like a sole proprietorship. A multi-member LLC is taxed like a partnership.
  
  
• Profits pass through to the owners’ personal tax returns.
  
  
• Rental income (from buy-and-hold properties) is usually considered passive income, which is not subject to self-employment tax.
  
  
• If you flip houses or provide property management services through your LLC, that income is often treated as active business income, which is subject to self-employment tax.
  
  

Pros of LLCs for Miami investors:

• Easy to create and maintain
  
  
• Liability protection for each property, if structured correctly
  
  
• Flexibility in tax classification (can elect S-Corp status later)
  
  
• Strong fit for rental property holdings
  
  

Cons of LLCs:

• Self-employment tax applies if you are earning active income from flips or services
  
  
• Florida LLC annual report filing fees apply
  
  

The Basics of an S-Corp

An S-Corp isn’t a type of entity you form directly—it’s a tax election. You can form an LLC or a corporation, then elect to be taxed as an S-Corp.

Tax treatment of an S-Corp:

• S-Corps avoid “double taxation” by passing income to owners’ personal returns, like an LLC.
  
  
• The key difference: you can pay yourself a reasonable salary and treat the remaining profits as distributions, which are not subject to self-employment tax.
  
  
• This can save substantial money if you have high net profits from active real estate activity.
  
  

Pros of S-Corps for Miami investors:

• Potential savings on self-employment tax
  
  
• Attractive for property flippers, agents, or developers earning active income
  
  
• Professional structure for building long-term business operations
  
  

Cons of S-Corps:

• More complex to maintain than an LLC
  
  
• Strict IRS rules on reasonable compensation
  
  
• Not always ideal for passive rental income (since that income usually avoids self-employment tax anyway)
  
  

Side-by-Side: LLC vs. S-Corp for Miami Investors

Liability Protection

• LLC: Yes
  
  
• S-Corp: Yes
  
  

Taxation

• LLC: Pass-through; rentals not subject to self-employment (SE) tax
  
  
• S-Corp: Pass-through; profits split between salary and distributions
  
  

Self-Employment Tax

• LLC: Applies to active income (flips, services)
  
  
• S-Corp: Salary portion only; distributions avoid SE tax
  
  

Best Fit

• LLC: Long-term rentals, holding properties
  
  
• S-Corp: Active income (flipping, wholesaling, property management)
  
  

Complexity

• LLC: Simple
  
  
• S-Corp: More complex (payroll, filings, strict rules)
  
  

Flexibility

• LLC: Can elect S-Corp status later
  
  
• S-Corp: Must meet IRS requirements from the start

Real-World Example

Imagine two Miami investors each netting $150,000 from real estate flipping in 2025.

• Investor A (LLC default): The Entire $150,000 is subject to the self-employment tax of 15.3%. That’s over $22,000 in payroll taxes alone, plus federal income tax.
  
  
• Investor B (S-Corp): Pays herself a reasonable salary of $70,000. The remaining $80,000 is taken as a distribution and is not subject to self-employment tax. This could cut payroll taxes by more than $12,000.
  
  

That’s why active investors often lean toward an S-Corp.

For long-term rental property owners, however, the tax savings may not be as significant. Since rental income isn’t subject to self-employment tax in the first place, sticking with an LLC is usually more efficient.

What Miami Investors Should Consider

Before making your choice, think about:

• Nature of income: Rentals vs flips vs mixed
  
  
• Number of properties: Single rental vs multi-property portfolio
  
  
• Growth plans: Passive investor vs active operator
  
  
• Tax bracket and other income: Can affect deductions and overall liability
  
  
• Future flexibility: LLCs can elect S-Corp later as income grows
  
  

The Bottom Line

For Miami real estate investors, both LLCs and S-Corps offer liability protection and pass-through taxation, but the tax savings depend on the type of income you earn.

• If your focus is long-term rentals, an LLC is usually the simpler and more effective structure.
  
  
• If you’re flipping houses, wholesaling, or earning active real estate income, an S-Corp may give you significant savings on self-employment taxes.
  
  

The choice isn’t always obvious, and the IRS has strict rules around “reasonable salary” for S-Corps. The safest move is to review your numbers with a tax professional before making the election.

Thinking about whether an LLC or S-Corp is right for your Miami real estate business? Sela Tax & Accounting LLC can help you compare the numbers and choose the structure that saves you the most. Visit us at selatax.com to get started.