Audits and taxes for LLCs choosing s-corp election

[Ashley C.]

I recently attended a bootcamp where one of the speakers was a tax guy. He was apoplectic when he talked about CPAs who set up clients in LLCs with an S-corp tax election in part to save on self-employment taxes. Swear to Jesus, thought he'd stroke out right on stage.
:protest:

His take was that this S-corp election requires Schedules C and SE, putting a red AUDIT ME sign on your back and exposing investors to a high risk of audit (more highly audited than any other type of return). He advised using a multi-member LLC taxed as a partnership, and using other tax strategies to make back the 15% or so you've lost in self-employment taxes. In other words, the high risk of a painful audit outweighs the benefit of self-employment tax savings.

It's not a critical issue for me at this point, but now I'm curious. I brought it up to my CPA, and now she wants to take this guy on and go 15 rounds.
:pissed:

Any thoughts?

[J Scott]

If you keep your proportion of dividends down (compared to salary), you should be fine. People get in trouble when they try to define "reasonable salary" as some ridiculously low amount and then pay the LARGE difference in dividends.

Not much of a sample size, but I've had LLCs taxed as S-Corps for more than 10 years now (real estate and non-real estate), and have never been audited...