On March 4, 2020, Bill 145 Trust in Real Estate Services Act, 2020
received Royal Assent, amending the Real Estate and Business Brokers Act, 2002
(the “Act”). Most recently, on October 1,
2020, Ontario Regulation 536/20: Personal Real Estate
Corporations (the “Regulation”) was filed and
came into force. As a result, Personal Real Estate Corporations
(“PREC”) are now permitted in Ontario. This means that
Ontario real estate agents can incorporate their business through a
PREC enabling them to take certain benefits of incorporation.
In order to qualify as a PREC, the PREC must satisfy the
- it must incorporate under the Ontario Business Corporations
- the real estate agent must be the
PREC’s sole voting shareholder, director, and officer;
- all non-equity shares of the PREC, if
any, must be owned by the real estate agent’s family members
or trustees for the benefit of minor children; and
- there must be no agreement
restricting or transferring the PREC’s sole director’s
ability to manage or supervise the business affairs of the
If a corporation qualifies as a PREC, it will be exempt from
broker or salesperson registration requirements under the Act
assuming further additional criteria prescribed by the Regulation
are also met.
The main benefit of becoming a PREC for Ontario real estate
agents is the newly-opened tax planning avenues. Firstly, tax may
be deferred by keeping the remuneration paid from the brokerage to
the PREC in the PREC until the real estate agent requires the money
to be paid out of the corporation by way of a dividend. Secondly,
there are new opportunities for income splitting by giving family
members non-voting shares of the PREC and paying them dividends,
subject to the 2018 Tax on Split Income (“TOSI”)
rules and exceptions.
The main drawback of incorporation is the extra administrative
costs of time and money related to operating a corporation,
including hiring a bookkeeper or an accountant, associated legal
costs, as well as time and money spent on corporate filings.
Co Author by: Karlo Varga (Student-at-Law)
Originally published by Minden Gross, October 2020
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.