Should a realtor open a PREC?

Commission income is lumpy, expenses are personal-adjacent, and CRA looks closely at both. That is the realtor's accounting problem in one sentence. A personal real estate corporation, or PREC, is one of the tools for dealing with it. It is not the answer for everyone, and the right time to find out is before you pay legal fees to set one up.

What a PREC changes

Without a PREC, commission lands in your hands and is taxed as yours in the year you earn it. With a PREC, commission can be earned by the corporation, which opens the question of how much to take out as salary or dividends and how much to leave inside. That deferral opportunity is the heart of the decision.

How we decide whether it makes sense

It depends on three things: how much income you leave in the business, your personal cash needs, and your brokerage's requirements. We model your income, your personal spending needs and the deferral opportunity, then tell you plainly whether incorporating helps this year, or next. If the answer is "not yet", we say so. Realtors who spend most of what they earn personally gain little from a PREC and inherit a corporate filing obligation.

What realtors can deduct

PREC or not, the deduction system matters. Realtors can deduct advertising, brokerage fees, vehicle use for business, home office, licensing, professional development, assistant wages and more, with the documentation CRA expects. The last clause is the one that decides reassessments. A vehicle log, a home office calculation and receipts that tie to the books are not optional.

The most common problem we see is everything running through one account. We separate business and personal, build a deduction system you can actually maintain, and remove the year-end scramble.

HST on commission income

Commission income carries HST. We handle registration, filing frequency and the reconciliation of brokerage statements to your filings, so what you remitted matches what the brokerage reported. Getting the filing frequency right matters because HST collected on a big closing is not yours to spend.

Instalments: the April problem

Tax instalments and HST catch realtors off guard because deals close unevenly. We forecast HST and tax instalments so cash is set aside as deals close, not scraped together in April. For PREC owners that forecast includes the corporate instalments and the personal tax on whatever is paid out.

Salary versus dividend inside a PREC

Once a PREC exists, how you pay yourself is a planning decision, not a default. Salary versus dividend planning is included in our Business plan and above, and the conversation belongs before December so the mix for the year is deliberate.

Teams, assistants and the brokerage side

Agents with assistants or a team add payroll to the picture: employee setup, pay runs, remittances, T4s and ROEs. Brokers and brokerages add commission and deal tracking across agents. We cover realtors, teams, brokers, brokerages, PRECs and mortgage agents with the same structure: clean separation, commission and deal tracking, vehicle and home office claims, corporate tax returns and monthly bookkeeping.

If you also own investment property

Many realtors hold rentals. Rental and investment property reporting sits alongside the PREC work: property-level cash flow, mortgage and interest schedules, capital versus repair classification and rental property tax. Adnan Feroz, our co-founder, works extensively in real estate and is the author of Beyond Riches with Income Properties, so this is a conversation we have often.

What a realtor engagement covers

Whether or not a PREC is in the picture, the monthly work for agents, teams and brokers covers the same ground:

• PREC setup and accounting, where it makes sense
• Commission and deal tracking
• HST on commission income
• Assistant and team payroll
• Advertising and marketing expenses
• Vehicle expense logs and claims
• Home office claims
• Corporate tax returns
• Salary versus dividend planning
• Tax instalments
• Monthly bookkeeping
• Rental and investment property reporting

If you already have an accountant

Switching does not have to wait for a year-end. We request prior-year files and CRA access, review what was filed and flag anything that needs correcting before we take over your filings. For realtors that review usually starts with the deduction system and the HST reconciliation to brokerage statements, because those are where reassessments come from.

When the answer is "not yet"

A PREC can be the right answer next year and the wrong one this year. If income is rising but personal spending still takes most of it, we set up the deduction system and the instalment forecast now, as a sole proprietor, and revisit incorporation when the numbers justify the extra filings. Nothing is lost by waiting for the right year; a corporation opened too early costs money every year it sits there.

What it costs

Monthly accounting starts from CAD 299 per month for sole proprietors and new corporations and is priced on transaction volume, payroll, entities and complexity. If a PREC is the right answer, the registration is a professional corporation setup through our business formation service, with government fees shown separately before you pay. Every price is confirmed in writing before any work starts.