Notes from the legal Hotline: Commission Checks

A salesperson in my office has set up an LLC; can I pay their commission to the LLC?

No. A broker may only pay fees and commissions from real estate transactions to an affiliated salesperson, broker, or a business entity with a corporate broker license. Commissions may not be paid to an unlicensed LLC. To take advantage of the benefits available to corporations, the LLC, or other corporate entity, must first be licensed with the Board of Registration of Real Estate Brokers and Salespersons.

Any business entity seeking a corporate broker’s license must have an officer or partner individually licensed as a broker by the Board before a license will issue to the corporation. This individual serves as a representative of the entity, and only a broker-officer or partner may obtain the broker’s license on behalf of the corporation. The Board cannot issue a salesperson’s license to a corporation or license a corporation that only has a salesperson serving as an officer or partner.

A broker who chooses to affiliate with another broker is not subject to this same limitation. Any broker, regardless of whether they are a broker of record, broker owner, or an associate broker, may establish a corporate entity to receive their real estate fees and commission so long as the entity is also licensed. The licensing restriction is specific to individuals holding a salesperson’s license.

Failure to properly license a corporation, or paying commissions to an unlicensed corporation, may result in punishment from the Board.