Prior to October 1, 2001, professionals generally, could not incorporate their practices, but when this was changed, realtors, otherwise known as salespersons and brokers, were left out. And thus, real estate services as a business, except as allowed by the laws that regulated brokerages, could not incorporate. Today, realtors in Ontario are able to incorporate their real estate business under the Ontario Business Corporations Act, without having to register as a licensed real estate brokerage. Thanks to Bill 104 – The Tax Fairness for Realtors Act, 2017, realtors can capitalize on many of the same tax and non-tax advantages enjoyed by other incorporated self-employed individuals.
However, unlike other incorporated self-employed individuals who are unregulated professionals (i.e., not licensed or registered as a professional in a field of practice), like realtors who trade and deal in real estate on behalf of others and who are registered or licensed under the Real Estate Business Brokers Act, 2002 (as of October 1, 2020 called the Trust in Real Estate Services Act, 2020), personal professional liability will not be limited through incorporation. This means that realtors will still be personally liable for any malpractice and errors or omissions that are a result of or incurred in the course of acting as a registered realtor.
The sole controlling (voting) shareholder of a PREC is restricted to a licensed or registered member under the Trust in Real Estate Services Act, 2020, governed by the Real Estate Council of Ontario (RECO) (i.e., a real estate salesperson or broker). However, there may be non-controlling (non-voting) shareholders so long as they are the immediate family members (spouse, children, parents or in trust for anyone of them) of the controlling shareholder being the registered realtor. In the case of controlling (voting) shares, they may be owned indirectly through a holding company, so long as that holding company is owned by the registrant. And similarly, in the case of non-controlling (non-voting) shares, the holding company must be owned by the immediate family members accordingly, or by anyone of them. Alternatively, both types of shares may be owned by a trust, so long as the beneficiaries align accordingly. The immediate family members do not need to be registered salespersons or brokers under the Trust in Real Estate Services Act, 2020, so long as their shares, directly or indirectly, are non-controlling (non-voting). Furthermore, the registrant must be the only director and officer of the PREC (i.e. the registered salesperson or broker must be the President of their own PREC). Finally, the registrant cannot enter into any side agreements whereby he or she would be restricting or delegating their authority and duties as the sole director and officer to anyone else.