- A personal real estate corporation must be incorporated under the Ontario Business Corporations Act and have one controlling shareholder who owns all the voting shares.
- Only the controlling shareholder or certain family members can own non-voting shares.
- A PREC may receive trading remuneration only from the brokerage, and the brokerage is not obliged to agree to pay it.
Many Ontario registrants wonder whether running their commissions through a corporation could make sense. A personal real estate corporation, often called a PREC, is the structure the regulator permits for that purpose.
This article explains how a PREC is set up, who can own its shares, and how the money flows. It does not cover tax planning, which depends on your income and circumstances and is best discussed with an accountant.
What a PREC is and what it is not
A PREC is a corporation set up by a registered broker or salesperson so that trading remuneration can be paid to the corporation instead of directly to the individual. The rules come from O. Reg. 536/20, as summarized in RECO's checklist.
It does not turn the agent into an independent business. The PREC is exempt from registration and cannot trade in real estate in its own right, and the agent must remain employed by the brokerage.
In plain terms, the corporation is a way to receive pay, not a way to practise. The registrant stays employed by the brokerage, and the PREC may receive trading remuneration only from the brokerage.
How a PREC must be set up
- It must be incorporated under the Ontario Business Corporations Act.
- It must have one controlling shareholder, who is a registered broker or salesperson.
- That person must own all the voting (equity) shares.
- That person must also be the president and the sole director and officer.
In short, the structure is deliberately simple: one registrant controls it and runs it. A partner, investor or colleague cannot hold voting shares or sit as a director.
These requirements apply together. The one controlling shareholder must hold all the voting shares and also be the president and the sole director and officer, so there is no room to share control with another person.
Who can own shares
Ownership of the voting shares is tightly limited, but non-voting shares allow some family involvement. Non-voting shares may be owned, directly or indirectly, only by the controlling shareholder or by their family members: spouse, children, parents, or a trust for a minor child.
| Who | Voting shares | Non-voting shares |
|---|---|---|
| Controlling shareholder (the registrant) | All of them | Permitted |
| Spouse, children, parents | Not permitted | Permitted |
| Trust for a minor child | Not permitted | Permitted |
| Anyone else | Not permitted | Not permitted |
The wording covers both direct and indirect ownership, so how shares are held matters as much as who holds them.
Because the rules turn on exact relationships and on direct or indirect ownership, check any proposed share structure with a lawyer before issuing shares.
How commissions are paid
A PREC may receive trading remuneration only from the brokerage. The registrant must notify RECO of the PREC's legal name and address for service before it receives any remuneration, and must report changes within five days.
A brokerage is not obliged to agree to pay an agent's remuneration to a PREC. The legislation permits it but does not require it. So the first practical step is asking your brokerage whether it will pay your corporation and what paperwork it wants.
Points that often cause confusion
- A PREC is not a second brokerage. It is exempt from registration and cannot trade in real estate in its own right.
- Setting one up does not mean your brokerage must pay it. The legislation permits that payment but does not require it.
- Family members can hold non-voting shares, but only the registrant holds the voting shares and serves as president and sole director and officer.
- Money for trading services goes to the PREC only from the brokerage, not from clients or other sources.
Questions about taxes, personal liability, insurance and how a corporation fits with your brokerage agreement depend on your situation. They are worth raising with an accountant and a lawyer before you incorporate.
What to do next
- Ask your brokerage whether it will pay remuneration to a PREC and what it requires.
- Speak with an accountant about whether the tax picture makes sense for you.
- Have a lawyer incorporate the company under the Ontario Business Corporations Act and plan the share structure.
- Notify RECO of the legal name and address for service before any remuneration is paid.
- Diarize the five-day deadline for reporting changes.
- Confirm the current rules with RECO, since the checklist is based on a 2020 version and regulations can change.
Naming and ongoing compliance details are worth confirming with RECO and a lawyer at the time you incorporate.
Frequently asked questions
Can my spouse be a director of my PREC?
The controlling shareholder must be the president and the sole director and officer. A spouse can own non-voting shares, but cannot be a second director or officer.
Can my PREC trade in real estate itself?
No. The PREC is exempt from registration and cannot trade in real estate in its own right, and the agent must remain employed by the brokerage.
Does my brokerage have to pay my corporation?
No. The legislation permits a brokerage to pay an agent's remuneration to a PREC but does not require it. Ask your brokerage what its policy is.
When do I have to tell RECO about my PREC?
Before the PREC receives any remuneration you must notify RECO of its legal name and address for service, and you must 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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