- A PREC must be incorporated under the Ontario Business Corporations Act and have one controlling shareholder who is a registered broker or salesperson who owns all the voting shares.
- Non-voting shares may be held only by the controlling shareholder or certain family members, or by a trust for a minor child.
- A PREC can be paid trading remuneration only by the brokerage, and the brokerage does not have to agree to pay it.
If you earn your income as a registered salesperson or broker in Ontario, you may have heard that you can run that income through your own corporation. A personal real estate corporation, often called a PREC, is the regulated version of that idea, and it comes with its own ownership and payment rules.
This article walks through who can own shares, how a PREC is paid, and what stays the same for you as a registrant. Tax and liability results depend heavily on your own numbers and family situation, so those parts are best settled with an accountant and a lawyer before you incorporate.
What a PREC is and how it is built
A PREC is a corporation that receives the commission income you earn from trading in real estate. Under the regulatory regime (O. Reg. 536/20, as summarized in RECO's 2020 checklist), it must be incorporated under the Ontario Business Corporations Act.
The structure is tightly limited. There must be one controlling shareholder, who is a registered broker or salesperson and who owns all the voting (equity) shares. That same person must also be the president and the sole director and officer.
These rules were set out in a 2020 checklist and sit under what is now the Trust in Real Estate Services Act, 2002. Rules can be amended, so confirm the current requirements with RECO or a lawyer before you incorporate.
Who can own shares in a PREC
Voting and non-voting shares are treated differently. The table below shows the split.
| Type of share | Who may own it |
|---|---|
| Voting (equity) shares | Only the controlling shareholder, who must be the registered broker or salesperson |
| Non-voting shares | The controlling shareholder, or their spouse, children or parents, or a trust for a minor child |
The family-member rule applies whether the shares are owned directly or indirectly. That matters if you are thinking about holding shares through another company or arrangement, because the indirect ownership must still trace back to someone on the permitted list.
If you want family members to share in the income, the permitted group is the place to start. Anyone outside it, such as a sibling, a friend or a business partner, cannot hold shares in a PREC. Whether sharing income this way makes sense for you is a tax question to take to an accountant.
How a PREC gets paid and what it cannot do
A PREC may receive trading remuneration only from the brokerage. It cannot collect commission from clients or from another source. The PREC is exempt from registration, but it cannot trade in real estate in its own right, and you must remain employed by the brokerage.
Before the PREC receives any remuneration, you must notify RECO of its legal name and address for service. If either changes, you must report the change within five days.
Your brokerage also has a say. A brokerage is not obliged to agree to pay your remuneration to a PREC. The legislation permits it but does not require it. Ask your brokerage about its policy early, since it may affect your timeline.
Tax and liability questions to raise
A corporation is a separate legal entity from you, which is why many people consider one. What that means in practice depends on your income, your other sources of income, your family circumstances and how you plan to use the money. Those answers are not the same for every registrant.
Because you must stay employed by the brokerage and cannot trade through the PREC itself, you should not assume that incorporating changes your professional duties as a registrant. Ask a lawyer how the corporation interacts with your obligations and with any personal exposure for your own conduct.
- How would the PREC be taxed compared with receiving commission personally, given your income level?
- If family members hold non-voting shares, what are the tax consequences for them?
- What ongoing filings and records does a corporation add?
- What happens to the PREC if you leave your brokerage, or if the brokerage declines to pay it?
- Does your insurance coverage need to change?
What to do next
Treat this as a planning decision, not a form to fill in. A short conversation with an accountant and a lawyer before incorporating is usually cheaper than correcting a structure afterward.
- Confirm with your brokerage whether it will pay remuneration to a PREC.
- Decide who, if anyone, will hold non-voting shares, and check that each person is on the permitted list.
- Plan for the corporation to be incorporated under the Ontario Business Corporations Act with you as sole director, officer and president.
- Notify RECO of the PREC's legal name and address before it receives any remuneration.
- Get tax advice on your own numbers before you move any income into the corporation.
Frequently asked questions
Can my spouse own shares in my PREC?
Yes, but only non-voting shares. Non-voting shares may be owned directly or indirectly by you or by your spouse, children, parents or a trust for a minor child. All the voting shares must stay with you.
Can my PREC sell houses on its own?
No. A PREC is exempt from registration and cannot trade in real estate in its own right, and you must remain employed by the brokerage. The corporation's role is to receive your trading remuneration.
Does my brokerage have to pay my commission to my PREC?
No. The legislation allows a brokerage to pay a PREC but does not require it to agree. Check your brokerage's policy before you incorporate.
Do I have 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, and report changes 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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