Is incorporation right for the Realtors of Ontario?
There has been a lot of discussion and I have had many questions as of late as to the merit of individuals in the real estate industry incorporating themselves. While this may be a consideration for a few, there are many reasons that incorporation may not be appropriate for all. It is important to have a needs assessment of the individual's current practice in order to fully evaluate the net benefit of incorporation.
In Ontario, individual registrants are not permitted to incorporate. The reasons for this are beyond the scope of this article, however, I would suggest that this is not something that is likely to change in the near future. Under the current status of independent contractor, registrants do enjoy tax benefits and can claim business expenses. What the registrants can not do in the absence of incorporation is defer their income; enter the concept of the mini franchise.
If a registrant earns a significant income (for example 300k+) they may want to consider the option of getting a Broker license and arranging a mini franchise with their current brand. Usually the "master company" will offer a management structure to assist with the running of the MF and the new entity can realize the economies. Otherwise, the cost of a stand alone brokerage becomes prohibitive and the agents are distracted from their core business development. There is also a hefty additional level of responsibility which can not be outsourced. Reliable management and operations partners are paramount.
In sum, the individual has to weigh whether the benefit of income deferral outweigh the cost and effort of operations and compliance. Your broker, accountant and lawyer should be able to guide you as to the best structure for your current practice.
Tina Gardin is Broker/owner of Sutton Group Quantum Realty Inc., serving Mississauga and Oakville for the past 20 years and Past President of the Mississauga Real Estate Board- Exclusive home of the New Age Of Real Estate Program TM
Advise should not be construed as expert advice in the area of accounting or law.