Today, owning a property is a simple thing since the availability of real estate owners is more. Having a property in the form of a building or land is necessary in this current world, and that property is a safety measure for future purposes. When buying a property, you have to consider and check many factors and to avoid the problems, a real estate agent or salesperson is best. Ontario is the best place for diversity and real estate business. You will see the Guide for Establishing PREC in Ontario in this post.
What is PREC?
Before knowing the procedure for starting PREC in Ontario, you have to know the meaning of PREC. A Personal Real Estate Corporation (PREC) is formed by a single real estate salesperson, associate broker, or managing broker to maximize a corporation’s income and tax planning potential. Personal real estate corporations may only conduct business in real estate or real estate transaction-related services. The PREC licensee must be the sole voting shareholder and the sole director/officer of their real estate corporation.
If you are a realtor and you want to qualify as a Personal Real Estate Corporation Ontario, you require certain qualifications listed below.
- The sole director is performing as the controlling shareholder.
- Have to incorporate under the Ontario Business Corporations Act, and the controlling shareholder must be a brokerage employee who is certified to trade in real estate.
- The PREC only applies to a single controlling shareholder, and all other investments and businesses must be managed through separate entities.
- A formal agreement has to be in place to define the relationship between the controlling shareholder, the brokerage, and the PREC.
- The client’s property or money cannot be held by PRECs.
Guidelines to Register for a Personal Real Estate Corporation in Ontario
It is easy to register for a Personal Real Estate Corporation Ontario, and you have the following details. In Ontario, the real estate agents are allowed to form PREC in 2020 only and to form this, and they have to register it first. For registering your PREC, you have to get the approval of the name and address of your PREC by giving notice to the Real Estate Council of Ontario (RECO). After that, you should file the articles of incorporation, and the most important requirement for forming PREC in Ontario is having the address for the head office in Ontario. There are some PREC resources for real estate professionals who are willing to start their own PREC on their website.
The lists of those PREC resources are there with the Ontario Real Estate Association (OREA), including the PowerPoint presentation, guides and videos etc. Equity owners in a PREC must be only one, and others like a spouse or other individual could not hold any equity shares. There is no direct pay from PREC to the members of PREC, and there is no name requirement for PREC by Ontario’s Real Estate and Business Brokers Act.
What can you do with a PREC?
This PREC is used in many places, and you can get some benefits like
- For life and retirement planning purposes, there will be a tax deferral.
- There will be an elimination/ decrease for the contribution of the Canada pension plan.
- You will get a diminishing in family tax where the income could be split with the family members under this circumstance.
Still, there are many discussions regarding this PREC, and however, it is the practical step to establish PREC in Ontario. When you establish the PREC, you can also get remuneration flexibility, deductible expenses etc., as a benefit. Finally, the details explained earlier are the way to register for a PRFC and use the details for your PREC establishment in Ontario.