What is a personal real estate corporation (PREC)?

What changed in Ontario in October 2020

Before October 2020, Ontario real estate agents were required to be paid personally for their commissions, since real estate regulations did not allow a brokerage to pay a corporation instead of the licensed individual. That changed when Ontario amended its real estate regulations, now consolidated under the Trust in Real Estate Services Act (TRESA), to permit a personal real estate corporation, letting an agent's brokerage pay commissions directly to a corporation the agent controls rather than to the agent as an individual.

The change did not alter who is actually licensed to trade in real estate. The individual agent remains the one registered with the Real Estate Council of Ontario and the one whose name appears on the brokerage's records as the registrant; the PREC is simply the entity that receives the payment for work the licensed individual performs. Brokerages had to update their own internal processes to support paying a corporation rather than an individual, which is part of why the rollout took some brokerages longer than others to fully support in practice.

Who has to own the shares

A PREC has specific ownership rules that do not apply to an ordinary corporation. The licensed real estate agent or broker must own all of the corporation's voting shares, and control of the corporation cannot be shared with anyone who is not the licensed individual. Family members, such as a spouse or children, can hold non-voting shares, which allows some income splitting through dividends paid on those shares, but they cannot hold voting control, and the corporation cannot be used to let a non-licensed person effectively run or control the real estate business.

How commissions actually flow through a PREC

Once a PREC is set up and registered with the agent's brokerage, the brokerage pays commissions on the agent's trades directly to the corporation instead of to the agent personally. The PREC then reports that commission income on its own T2 corporate return, and the agent draws salary or dividends from the corporation the same way any incorporated owner-manager would, a decision covered in T4 or T5 as an owner-manager. The PREC also needs its own GST/HST registration once its commission income crosses the small supplier threshold, since real estate commissions are a taxable supply and the PREC, not the individual agent, is now the entity earning them.

Why a PREC does not protect you from professional liability

A PREC is a tax and income-structuring tool, not a liability shield. Ontario's rules make clear that incorporating does not change the agent's personal professional responsibility for their real estate activities, and the agent remains personally accountable to the Real Estate Council of Ontario and subject to the same professional standards and discipline as an unincorporated agent. Anyone expecting a PREC to insulate them from a client dispute or a regulatory complaint is thinking about the wrong benefit; the protection a PREC offers is tax deferral, not a liability wall between the agent and their work.

The actual tax benefit: deferral, not elimination

Like any active Canadian-controlled private corporation, a PREC can access the small business deduction, taxing its commission income at a combined rate around 12.2% in Ontario rather than the agent's personal marginal rate, which can run considerably higher on the same income earned directly. The benefit only really shows up for income the agent leaves inside the PREC rather than withdrawing right away; commissions drawn out immediately as salary or dividends end up taxed at close to the same total as they would have been without a PREC at all, for the same integration reasons covered in sole proprietorship or corporation: how do the taxes compare. A PREC earns its keep for an agent with income well above what they need to live on each year, not for one spending every commission as it arrives.

When setting one up actually makes sense

A PREC generally makes the most sense for an established, high-earning agent with meaningful, consistent commission income who can genuinely leave some of it inside the corporation to reinvest or save at the lower corporate rate. A newer agent with modest or unpredictable commission income usually has little surplus to defer tax on in the first place, and the cost of a second corporate return, minute book, and ongoing compliance can outweigh a deferral benefit that has not become real yet.

What the brokerage side needs to have in place

Setting up a PREC is not something an agent can do entirely on their own; the agent's brokerage has to agree to pay the PREC and typically requires specific documentation confirming the corporation meets TRESA's ownership rules before commissions start flowing to it. Larger real estate brokerages generally have an established process for onboarding an agent's PREC, while a smaller brokerage may be handling the request for the first time, so it is worth confirming the brokerage's specific requirements early rather than assuming every brokerage handles this identically.

Naming is worth planning for as well. A PREC's corporate name still has to comply with the naming restrictions real estate regulators apply to the sector, so a name is not simply chosen the way any other small business might pick one; it should be checked against those rules before the incorporation documents are filed rather than after.

How we handle this

We model an agent's actual commission income and personal spending needs before recommending a PREC, set up the voting and non-voting share structure correctly, and handle the ongoing T2, GST/HST, and minute book work once it is in place. This is part of our dedicated realtor incorporation support.