Personal Real Estate Corporations in Ontario: How Realtors Incorporate

Ontario real estate salespeople and brokers can incorporate a personal real estate corporation (PREC) to receive their commission income through a corporation rather than personally. The appeal is mostly about tax and income planning, but setting one up correctly involves legal structuring that goes beyond simply filing articles of incorporation.

This article explains what a PREC actually does, how it's typically structured, and what stays the same regardless of whether you incorporate.

What a PREC Actually Does

It's worth being precise about this, because it's commonly misunderstood: a PREC does not trade in real estate itself and is not licensed to trade in real estate. The individual salesperson or broker remains the one who is personally registered and personally responsible for all real estate trading activity. The corporation's role is narrower — it exists to receive the remuneration that would otherwise be paid directly to the individual.

How a PREC Is Typically Structured

• It's incorporated under the Business Corporations Act (Ontario), the same statute that governs any other Ontario corporation.
• The real estate professional is generally required to be the corporation's controlling shareholder, holding its voting shares.
• Non-voting shares may be permitted for certain family members, subject to whatever the current rules allow.
• The real estate professional is typically also the corporation's sole director.

The specific eligibility rules — who can hold shares, on what terms, and what naming conventions apply — are set and updated by Ontario's real estate regulator. Confirm the current requirements before incorporating rather than relying on what a friend's PREC looked like a few years ago.

Setting Up a PREC: What's Generally Involved

• [ ] Incorporate an Ontario corporation that meets the applicable share-ownership and naming conditions
• [ ] Confirm the arrangement with your brokerage, since it still pays the commission and needs to document that it's paying your corporation rather than you personally
• [ ] Register the PREC with Ontario's real estate regulator as required, in addition to your own individual registration
• [ ] Set up proper corporate records for the new corporation — articles, a minute book, and share registers, the same as any other Ontario corporation
• [ ] Talk to an accountant before commissions start flowing through the corporation, since the tax and income-splitting implications are the main reason most realtors consider this structure in the first place

What a PREC Does Not Change

• You remain personally licensed and personally accountable for your trading conduct and professional obligations.
• The PREC doesn't insulate you from professional discipline or claims arising from your real estate work — that exposure follows the individual, not the corporation.
• Ordinary corporate housekeeping still applies. An out-of-date minute book is one of the most common problems that surfaces later, whether in a sale, a refinancing, or simply trying to prove who owns what.

Common Misconceptions About PRECs

• A PREC doesn't replace your individual registration or RECO oversight. It operates alongside your existing obligations, not instead of them.
• Incorporating doesn't automatically reduce your tax bill. Whether it helps — and by how much — depends on your specific income and how the corporation is used, which is exactly why accountant input matters before you incorporate, not after.
• A PREC isn't only for top producers, but the added administrative and compliance work generally only pays for itself once income reaches a certain level. Model the numbers before assuming it's worthwhile.

Frequently asked questions