A Personal Real Estate Corporation (PREC) offers licensed realtors in British Columbia a streamlined and tax-efficient way to operate their business. If you’re a managing broker, associate broker, or licensed real estate representative, understanding the structure and compliance rules of a PREC can help you take full advantage of its benefits.
What Is a Personal Real Estate Corporation (PREC)?
A PREC is a specialized corporation that allows licensed real estate professionals to provide their services through an incorporated entity. Governed by the Real Estate Services Act and regulated by the BC Financial Services Authority (BCFSA), PRECs are subject to specific provisions outlined in the Real Estate Services Regulation and Real Estate Services Rules.
Who Can Incorporate a PREC in British Columbia?
To incorporate a PREC in BC, you must be a:
- Licensed managing broker
- Associate broker
- Licensed real estate representative
You’ll need two licences:
- One for yourself
- One for the corporation
Both licences must be at the same level and for the same real estate service category. Also, the PREC must be aligned with the same brokerage where the professional is licensed.
Ownership and Control of a PREC
A PREC is tightly controlled and highly personal. The licensed professional must:
- Be the sole voting shareholder
- Act as the sole director and senior officer
Who Can Hold Non-Voting Shares?
While voting shares are exclusive, non-voting shares can be held by:
- The spouse of the licensed professional
- Children of the licensed professional
- A corporation owned by the professional and/or their family
- A trust benefiting the professional and/or their family
Important: Failing to comply with ownership regulations will render the PREC’s licence inoperative. Immediate notification to BCFSA is required if compliance is compromised.
Restrictions on PREC Activities
A PREC can only provide real estate services and related ancillary services. It cannot engage in unrelated business activities, including:
- Stock or bond trading
- Owning unrelated real estate properties
- Real estate development
Always consult a legal advisor before engaging in any additional business activities through your PREC.
Steps to Incorporate a PREC in BC
- Name Approval
- Submit a name request to the BC Corporate Registry.
- The name must include your legal name (or recognizable short form) and the words “personal real estate corporation.”
- Document Preparation
- Draft and sign the incorporation agreement and articles.
- Supporting Documents
- Prepare organizational paperwork including:
- Resolutions
- Share certificates
- Director consent forms
- Corporate registers
- Prepare organizational paperwork including:
Professional assistance is highly recommended during incorporation.
After Incorporation: Ongoing Compliance Requirements
To stay compliant:
- File an annual report within two months of each anniversary of incorporation.
- Conduct a transparency register review in the same two-month window.
For instance, if you incorporated on July 1, you must complete these tasks between July 1 and August 31 each year.
Don’t Forget These Post-Incorporation Steps
- Apply for a PREC licence with BCFSA
- Open a corporate bank account
- Register for GST
- Select your financial year-end
- Register with WorkSafeBC
Final Thoughts
Incorporating a PREC can provide significant financial and operational benefits for real estate professionals in British Columbia. However, strict compliance with legal and regulatory requirements is essential. Consulting with a real estate lawyer or tax advisor can make the process smoother and ensure long-term success.
For more guidance and updates, visit the BCFSA website. You’ll find detailed resources on licensing, compliance, allowable business activities, and more.
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