- A PREC must be incorporated under the Ontario Business Corporations Act and have one controlling shareholder who is a registered broker or salesperson.
- Only the controlling shareholder or certain family members can hold non-voting shares, and the PREC can be paid only by the brokerage.
- A brokerage does not have to agree to pay an agent's remuneration to a PREC, so the arrangement depends on the brokerage's agreement.
If you are a real estate salesperson or broker in Ontario, you may have heard about setting up a personal real estate corporation, often called a PREC. It lets a registrant receive their trading remuneration through a corporation instead of personally, but the rules about who owns it and who pays it are strict.
This article walks through the main structural rules: how a PREC is set up, who can own its shares, how it gets paid, what you must tell RECO, and what a PREC cannot do. The rules come from O. Reg. 536/20 under the Trust in Real Estate Services Act, 2002 (TRESA), as described in RECO's December 2020 checklist, so check for amendments before you act. This article does not cover tax questions; speak to an accountant about those.
How a PREC must be set up
A personal real estate corporation must be incorporated under the Ontario Business Corporations Act. It must have one controlling shareholder, who is a registered broker or salesperson and who owns all of the voting (equity) shares.
That same person must also be the president and the sole director and officer of the corporation. In practice, this means no partners, co-directors or other officers can sit alongside the registrant in the PREC.
On naming, RECO has said TRESA imposes no specific name requirement, but the name must not suggest the corporation is a brokerage.
Who can own shares
Voting shares are held only by the controlling shareholder. Non-voting shares may be owned, directly or indirectly, only by the controlling shareholder or by their family members.
The family members the rules allow are:
- the controlling shareholder's spouse
- their children
- their parents
- a trust for a minor child
Anyone outside that group, such as a business partner or a friend, cannot hold shares in the PREC, even non-voting ones.
How a PREC gets paid
A PREC may receive trading remuneration only from the brokerage. It cannot collect commission directly from a buyer or seller.
A brokerage is not obliged to agree to pay an agent's remuneration to a PREC. The legislation permits the arrangement but does not require it. Before you incorporate, ask your brokerage whether it will pay a PREC and on what terms.
What you must tell RECO, and what a PREC cannot do
Before the PREC receives any remuneration, the registrant must notify RECO of the PREC's legal name and address for service. If those details change, the registrant must report the change within five days.
The PREC is exempt from registration, but it cannot trade in real estate in its own right. The agent must remain employed by the brokerage. The PREC is a way of receiving pay, not a separate real estate business.
| Topic | Rule |
|---|---|
| Incorporation | Ontario Business Corporations Act |
| Voting shares | All held by one registered broker or salesperson |
| Non-voting shares | Controlling shareholder or listed family members only |
| Who pays the PREC | The brokerage only |
| Notice to RECO | Before first payment; changes within five days |
What to do next
Because these rules come from a regulation that may have been amended, confirm the current requirements with RECO before you incorporate. A lawyer can help you set up the corporation and share structure correctly, and an accountant can advise on the tax side.
- Ask your brokerage whether it will pay remuneration to a PREC
- Choose a corporate name that does not suggest a brokerage
- Incorporate under the Ontario Business Corporations Act
- Confirm you will be sole president, director, officer and holder of all voting shares
- Check that any non-voting shareholders fit the permitted family group
- Notify RECO of the legal name and address for service before you are paid
- Plan to report any change in those details within five days
- Check for amendments to the rules before you start
Frequently asked questions
Can my business partner own shares in my PREC?
No. Non-voting shares may be held only by the controlling shareholder, a spouse, children, parents, or a trust for a minor child. All voting shares must be held by the controlling shareholder.
Can a PREC be paid directly by a client?
No. A PREC may receive trading remuneration only from the brokerage. It also cannot trade in real estate in its own right.
Does my brokerage have to pay my PREC?
No. The legislation permits a brokerage to pay an agent's remuneration to a PREC but does not require it. You need your brokerage's agreement.
Do I need to tell RECO about my PREC?
Yes. You must notify RECO of the PREC's legal name and address for service before it receives any remuneration. Changes must be reported within five days.
Sources
- RECO – PREC Checklist — reco.on.ca
- RECO – Personal real estate corporations — reco.on.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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