What is an Ontario PREC?
In Ontario, PREC stands for “Personal Real Estate Corporation.” A PREC is a specific type of corporation that allows real estate professionals, such as real estate agents or brokers, to operate their business through a corporate entity rather than as sole proprietors or partnerships.
Since October 1, 2020, real estate agents and brokers in Ontario could incorporate Personal Real Estate Corporations (PREC) to receive payments for their services from their brokerages.
What are the benefits of incorporating a PREC?
- Limited Liability Protection: One of the primary benefits of operating as a PREC is limited liability protection. Shareholders of the PREC (typically the real estate professional and their family members) are shielded from personal liability for the corporation’s debts, liabilities, and legal claims arising from real estate transactions.
- Tax Advantages: PRECs may benefit from certain tax advantages, such as income splitting with family members, tax deferral for life, and deducting business expenses. An owner of a PREC will pay only 12.2% tax as a small corporate business.
Requirements and Considerations:
- To operate as a PREC in Ontario, real estate professionals must meet certain eligibility criteria and comply with regulatory requirements set by RECO.
- The PREC must be registered with RECO and adhere to the rules and guidelines governing personal real estate corporations, including reporting obligations and corporate governance standards.
- With a PREC, the only activity the corporation can take part in is billing the brokerage to receive payment ( a real estate professional must be working with a brokerage to incorporate).
- Under a PREC, you can’t operate any other type of business, buy and sell property, or advertise through the corporation, among other restrictions.
Who can start an Ontario PREC?
- One more individuals above the age of 18;
- Needs to have a physical address in Ontario. If you don’t have a local provincial address, we provide registered address and mail scanning service.
- To be eligible for forming a PREC, the controlling registrant must be an existing member of the Real Estate Council of Ontario (RECO).
What are the incorporation steps?
Step 1. Name your corporation.
For a Corporation Name use your first and last name + “Professional Real Estate Corporation” (legal suffix). For a PREC in Ontario NUANS report is required.
Step 2. Select your articles of incorporation:
This step establishes the structure of your corporation. As per PREC rules, the controlling director must be the ‘controlling shareholder’. You can’t add anyone else for in class A equity voting share. Though in most PREC cases, class B non-voting shares are not issued, yet as per PREC rules, the corporation has the choice to issue class B non-equity (non-voting) shares. The controlling shareholder and/or family member (minimum age 18) can hold non-equity class B (non-voting) shares.
Step 3. Establish the office address.
Registered office address must be a physical address in Ontario. Mailing address can be a PO BOX. You are allowed to have a legal land description address too but must have a P.O. Box connected to it. If you don’t have a local provincial address, we provide registered address and mail scanning service.
Step 4. Appoint a director.
The real estate salesperson who has the PREC license must be the only voting shareholder and the only director or officer of their very personal real estate corporation
Mandatory items to run a business.
- Minute book: consists of bylaws, share structure, minutes & other legal sections. Without it, a corporation is not complete.
- Initial Return: It’s a mandatory filing with Service Ontario for each new corporation. It has to be filed within 60 days of Incorporation. It confirms the details of the corporation. It is not a tax filing with CRA.
- Business Number: It is a unique identification of your business with the Canada Revenue Agency. It is required to register accounts like GST/HST, Payroll, Import/Export accounts.
- Corporate Tax ID: It is like a SIN number for a corporation.
- HST Registration, Harmonized Sales Tax: If you are selling goods and collecting HST you must have an HST account. every time a business incurs an expense – be it rent or paying for goods – it pays HST, if you set up the account, you can claim it back.
- Payroll Account: If you have employees, including yourself, you must set up a payroll account.
- Import/Export: If your goods or raw materials cross the Canadian border, you are required to clear customs using the Import/Export account.
- WSIB Account: It’s the Workplace Safety and Insurance Board registration. If your corporation has employees (except directors and shareholders) you must register for WSIB.
- Annual Return: A corporation must file its Annual Return with the Government every year to keep it active. You may add Annual Return to your package to avoid the risk of forgetting it. We will take care of it!
You can find out more information about annual return here:
How do we process the order?
- We start by verifying the payment and reviewing the order to ensure an error-free application.
- For named companies, we conduct name searches, make reservations, and obtain name approval.
- Next, we prepare the application and articles of incorporation.
- Before registering the corporation, we send a draft for a final check.
- Once approved, we register the corporation according to the chosen queue and promptly email all registration documents to the customer.
- Finally, we complete any additional services included in the package, such as initial returns and CRA accounts.
Timeline
The standard incorporation time for an Ontario Corporation is one business day. However, for an additional fee, we can expedite the process and complete it within just one business hour. Please be aware that the turnaround time is until 3 p.m. EST. The Processing Queue includes Incorporation and Emailing the Certificate, Articles and Electronic Minute Book (if included). The remaining processes in this package like Business Number, CRA programs accounts set up, WSIB registration, etc. are initiated after incorporation processes.
What will you receive?
After the registration is completed we will send you a Certificate and Articles of Incorporation and an Electronic Minute Book (if included) by an email.
Why choose us?
- Online Business Registry is an official intermediary of Ontario and a registered member of Corporations Canada.
- Our team of legal professionals and incorporation experts can establish your corporation within two business hours!
- Simply complete the straightforward form on our website, and we’ll handle the rest.
- With a wealth of experience in business incorporation, we pride ourselves on guiding entrepreneurs through the process with expertise and precision.
- Our team of legal professionals and incorporation experts can establish your corporation within two business hours!
- Simply complete the straightforward form on our website, and we’ll handle the rest.
- With a wealth of experience in business incorporation, we pride ourselves on guiding entrepreneurs through the process with expertise and precision.
