I have always worked for a brokerage and started noticing some companies were actually a company working under another company. In fact my company, Fathom Realty, has a few themselves. I didn't think too much about it until I saw this article from NCAR. I have an LLC but have not really done anything with it yet but maybe I should start.
It would be kind of neat to sell homes with my own brand but then I would have to start the branding process all over. Something to think about.
Let me know how you use yours.
Release Date: 10/11/2016
John Wait, Martin & Gifford, PLLC
QUESTION: My accountant recommended that I create a limited liability company (“LLC”) for the purpose of receiving my sales commissions. He said that I could save some money on taxes and save for retirement with a Simplified Employee Pension Plan. If I set up an LLC, do I need to be licensed by the NC Real Estate Commission? Do I need to designate myself as the broker-in-charge (“BIC”) of the LLC?
ANSWER: Under section A.0110 of the license law, your LLC will need to be licensed, but you do not need to designate a BIC as long as your LLC: “(1) has been organized for the sole purpose of receiving compensation for brokerage services furnished by its qualifying broker through another firm or broker; (2) is treated for tax purposes as a Subchapter S corporation by the United States Internal Revenue Service; (3) has no principal or branch office; and (4) has no licensed or unlicensed person associated with it other than its qualifying broker.” Under section A.0502(b), the qualifying broker of such an LLC (1) cannot be a provisional broker and (2) must be the manager of the limited liability company. The rules effectively prohibit a provisional broker from establishing a business entity to receive compensation.
Be sure to consult with both your accountant and your attorney to make sure that you are setting up your LLC, or other business entity, correctly. There are benefits to receiving your commissions through an LLC, but the risks may outweigh the benefits if you do not create and operate your company in compliance with the license and tax laws. For example, an LLC must be licensed before any commissions can be received by it.
NC REALTORS® provides articles on legal topics as a member service. They are general statements of applicable legal and ethical principles for member education only. They do not constitute legal advice. The services of a private attorney should be sought for legal advice.
© Copyright 2016. North Carolina Association of REALTORS®, Inc. This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain. Any unauthorized reproduction, use or distribution is prohibited.