26 Feb Personal Real Estate Corporations
Last year, we saw a drastic increase in the number of licensed realtors who inquired about incorporating a personal real estate corporation. A personal real estate corporation (“PREC”) allows licensed realtors to take advantage of the benefits of incorporating. Specifically, by incorporating a licensed realtor may take advantage of tax savings through lower tax rates (currently the small business tax rate is 13% on the first $500,000 of taxable income and 26% thereafter) and income splitting.
In order for a licensed realtor to incorporate a PREC, the licensed realtor and the PREC must comply with the provisions of the Real Estates Services Regulations, B.C. Reg. 269/2010. The following is a summary of the criteria that must be met:
- The licensed realtor must be the sole president, director and voting-shareholder of the PREC;
- The licensed realtor is employed by the PREC or acting as an independent contractor for the PREC;
- Any non-voting shares are legally and beneficially owned by the licensed realtor or an affiliated person or entity of the licensed realtor (i.e. a spouse, child, a corporation, all of the shares of which are owned by the licensed realtor or a spouse or child of the licensed realtor, or a trust, all of the beneficiaries of which are the licensed realtor or a spouse or child of the licensed realtor);
- The PREC only provides real estate services or services that facilitate real estate services (in other words, the PREC may not actively trade in stocks or bonds or develop real estate);
- The licensed realtor and the PREC must each have a real estate license and the licensed realtor must be licensed to the same brokerage as the PREC; and
- The legal name of the PREC must include the legal name of the licensed realtor or a recognizable short form of the legal name, followed by the term “personal real estate corporation”.
If you are a licensed realtor is who is able to retain income in the PREC or take advantage of income splitting, then a PREC may be a great option for you. If you are interested in incorporating a PREC or obtaining further information regarding a PREC, please feel free to contact Sitka Law Group. Sitka Law Group is conveniently located at #202 – 3750 Shelbourne Street near the intersection of the borders of Victoria, Oak Bay and Saanich.