Momentum Business Law | The Ontario Entrepreneur's Law Firm

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Legal Basics of Personal Real Estate Corporations (PRECs)

As of October 1, 2020, real estate agents in Ontario are able to form personal real estate corporations (PRECs). This allows agents the flexibility which many other professions have, to operate as corporations instead of sole proprietors. Although PRECs are now available, they are not required.

This can allow significant tax planning advantages for real estate salespeople or brokers. The sole purpose of the PREC is to receive compensation from a brokerage which is earned by a registered broker or salesperson. The PREC does not directly provide the services of a salesperson or broker.

Can I Incorporate Myself?  While a “DIY Incorporation” can be fine in many circumstances, corporations with specific requirements in terms of shares and structure should be done by a lawyer. A legal team experienced with professional corporations brings the knowledge and experience in structuring and requirements to advise you on your personal situation and can complete the proper filing.

Should I Get Accounting Advice Before I Incorporate? Yes! The decision to incorporate will largely be driven by tax and accounting considerations. If you don’t have an accountant involved in your business already, we are happy to make a referral.

Who Can Be a Shareholder? The PREC must be owned by a controlling shareholder who owns the voting shares of the corporation. The controlling shareholder must be employed by a brokerage to trade in real estate. That controlling shareholder (broker or salesperson) can own shares through a holding company, provided that they control the holding company as well. Family members of the controlling shareholder can hold non-voting shares of the PREC.

Who Else Can Be Involved with the Corporation? The controlling shareholder must be the sole director and officer of the corporation.

Does a PREC Need to Be Registered With RECO? No, a PREC is exempt from registration. However, the legal name and address for service do need to be provided to RECO.

Can I Use an Existing Corporation as a PREC? Possibly. The PREC needs to meet certain criteria so an existing corporation can be used if amended to meet those criteria.

Does the PREC Need to Have an Agreement with the Brokerage? Yes, there must be a written agreement between the PREC and the Brokerage which meets certain criteria.

What Can I Name My PREC? Although there are no rules requiring specific naming of a PREC, you are not able to advertise using the PREC name as this would imply that the PREC is providing services directly. Given that restriction, we recommend using a fairly basic name or a numbered company name.

HOW MOMENTUM CAN HELP: Book your free PREC consultation using the link below. We can complete your incorporation and create a PREC/ Brokerage Agreement for you. We work perfectly in a virtual world - we will meet you where you are, online! You will sign documents digitally and receive your Minute Book online.

Fees:

$1200+HST (plus filing fees of approximately ~$450) PREC Incorporation

$500: PREC & Brokerage Agreement