Personal Real Estate Corporation (PREC)
PREC- Let’s get started
Forming a PREC is a complex task with a number of considerations that may differ depending on every REALTORS® own business situation. The advantages of forming a PREC exist only if it is set up correctly in accordance with your business, family and personal circumstances.
Homelife Paramount cannot provide legal, tax, or business advice. The information provided here is intended as a general information guide. Federal and provincial tax laws and rates change frequently. All Paramount Members should consult with their own legal counsel and tax advisors regarding their personal situations to determine if forming a PREC makes sense for them and to learn how to ensure that their PREC will provide the benefits they expect.
What is a Professional Corporation?
A professional corporation allows members of regulated organizations to enjoy tax advantages, similar to traditional private corporations. Professional corporations ensure accountability and liability, while safeguarding the public. Regulated by the Real Estate Council of Ontario (RECO) , REALTORS® have the privilege of forming PRECs under the Trust in Real Estate Services Act (TRESA).
The rules for professional corporations differ slightly across provinces and professions. It is important to work with your accountant and lawyer when you consider forming a PREC. More importantly, the way your PREC functions, the shareholdings, the contractual relationships formed, and how your business is operated and documented, all affect the tax benefits you may hope to achieve.
Your current situation, your family situation, and other factors will affect whether and how you and your family can benefit from forming a PREC. You may need ongoing advice from your tax advisor to determine how to best maximize tax savings as your circumstances change from year-to-year.
It’s important to note that PRECs differ from traditional private corporations in at least the following keyways:
- Only REALTORS® can be voting shareholders of a PREC.
- Either the REALTOR® or the PREC or both are subject to the oversight and regulatory powers of RECO.
- The PREC can only be used if specific rules and regulations are followed.
- A PREC does not limit professional liability.
Is a PREC Right for You?
There are a number of factors to consider when deciding to form a PREC. OREA strongly encourages you to work with your financial advisor, lawyer, and accountant to determine if forming a PREC is right for your personal and business situation.
When beginning to think about whether forming a PREC is the right decision for you, consider the following questions:
- Are you earning more than what you need to meet your daily living expenses?
- Do you want to save more money for retirement?
- Could you benefit from distributing business income to your family members?
- Are you considering passing your business on to a family member who is or will be a real estate salesperson or broker registered with RECO?
- Are you considering selling your business to a real estate salesperson or broker registered with RECO?
- Are you incurring significant business expenses that are either not deductible, such as life insurance premiums, or only partially deductible, such as meal and entertainment expenses?
- Where are you in your professional journey? Are you just starting your real estate career or are you heading towards retirement?
Additional resources: Only REALTORS® can be voting shareholders of a PREC.
Either the REALTOR® or the PREC or both are subject to the oversight and regulatory powers of RECO.
The PREC can only be used if specific rules and regulations are followed.
A PREC does not limit professional liability.
Is a PREC Right for You?
There are a number of factors to consider when deciding to form a PREC. OREA strongly encourages you to work with your financial advisor, lawyer, and accountant to determine if forming a PREC is right for your personal and business situation.
When beginning to think about whether forming a PREC is the right decision for you, consider the following questions:
- Are you earning more than what you need to meet your daily living expenses?
- Do you want to save more money for retirement?
- Could you benefit from distributing business income to your family members?
- Are you considering passing your business on to a family member who is or will be a real estate salesperson or broker registered with RECO?
- Are you considering selling your business to a real estate salesperson or broker registered with RECO?
- Are you incurring significant business expenses that are either not deductible, such as life insurance premiums, or only partially deductible, such as meal and entertainment expenses?
- Where are you in your professional journey? Are you just starting your real estate career or are you heading towards retirement?
Additional resources:
