Agent Commission To Be Paid Directly, Not Through LLC

Tax time is coming and there is a lot of talk about teams and the role broker’s play in regulating and managing team members.  This week’s question for the MAR legal hotline involves paying an LLC rather than an individual agent with a social security number.  Question: Can a team (or agent) be paid their commissions through an LLC?

A. In most circumstances, paying commissions to a team through an LLC would be illegal. In Massachusetts, a broker may only pay fees and commissions from real estate transactions to an affiliated salesperson, a broker, or a business entity with a corporate broker’s license. In order for a corporation to become licensed, a partner or officer must hold an individual broker’s license and act as the representative of that corporation.

The challenge for teams wanting to incorporate in some fashion is the subsequent disbursement of commissions to the appropriate team members. Any team member who holds a salesperson’s license can only be compensated by the broker with whom they are affiliated. It would be illegal for those commissions to be disbursed to a salesperson by another broker. An incorporated team also raises questions about whether salespersons within the team are affiliating with multiple brokers, which is prohibited by license law.  The Board of Registration released a Massachusetts Teams FAQ that might be helpful if you are working within that structure.