Can a Real Estate Agent Form a Company?

While a licensed real estate agent can form a real estate company, her new company will need a broker if she isn’t one herself. Each state has its own real estate department, which licenses and regulates its real estate industry. The actual process of creating a real estate company varies by state. To determine the rules, regulations and process for establishing a real estate company in your state, contact your real estate department.

Corporation

Before forming a real estate company, the real estate agent might establish a corporation or limited liability company (LLC). Laws regarding the establishment of corporations and LLCs vary by state. Often, the agent creates the corporation or LLC before the brokerage.

Brokerage

The common term for a real estate company is brokerage. “Modern Real Estate Practices” defines brokerage as the “bringing together of parties interested in making real estate transactions.” The real estate department licenses brokerages within its state. When forming the brokerage, the real estate agent typically must apply to the real estate department for name approval. It is possible the real estate department won’t approve the name the real estate agent wants to use. Once the agent selects a name that the real estate department approves, he can proceed with the licensing of the brokerage.

Broker

A licensed real estate sales agent must work under the supervision of a licensed real estate broker. An experienced real estate agent can obtain a broker’s license after successfully completing a broker’s course and passing the state and federal licensing exams. The number of years' experience required before pursuing a broker’s license can vary by state. The supervising broker is the designated broker. Brokers working for the brokerage who are not the designated broker are associate brokers. Like sales agents, they work under the authority of the designated broker.

Designated Broker

A brokerage must have a designated broker. Therefore, if the real estate agent forming the company is not a broker, he must hire a broker for the brokerage. The designated broker may not be an employee of the brokerage in the eyes of the Internal Revenue Service. Like many real estate agents, the broker might work on commission as opposed to a salaried employee with set hours. The designated broker is responsible for the actions of the sales agents and associate brokers under his supervision. Should a licensee under his supervision violate real estate laws, he, as well as the brokerage, faces penalties.

References

• "Modern Real Estate Practice"; Fillmore Galaty, et al.; 2006