Image by © Royalty-Free/Corbis
Image by © Royalty-Free/Corbis

By Tony Palermo

Re/Max Integra has brought agent incorporation to Ontario.

Called the Agent Brokerage Program, the initiative brings Ontario in line with other provinces like British Columbia where real estate agents can incorporate and take advantage of the benefits, including significant tax deferral, which operating their business as a corporation offers.

Re/Max Ontario – Atlantic Canada executive vice-president and regional director Gurinder Sandhu says the program has been years in the making and was something top-performing real estate agents in Ontario have been demanding for quite some time.

“If you look at any major profession – accountants, lawyers, doctors, dentists, whatever – they’re all able to incorporate and set up a corporate structure to operate their business in the most tax-effective way possible,” says Sandhu. “Most professions have that ability, and in many Canadian provinces, so do Realtors. But it wasn’t so in Ontario. We’ve been lobbying for at least a decade to bring agent incorporation to Ontario.”

Sandhu says despite the intense lobbying, the Real Estate Council of Ontario (RECO) wouldn’t change its position on allowing agent incorporations. So, Re/Max began looking for another way they could introduce it. They found a way about a year ago and have been refining the model and putting it through an extensive due diligence process with tax and regulatory specialists.

Re/Max’s Agent Brokerage Program is geared towards both individual agents and teams.  It’s of benefit to those who, speaking strictly in dollar amounts, earn over $300,000 a year and who want to retain money in their business as a tax deferral strategy.



The program works by allowing individual agents or teams to incorporate themselves as mini-brokerages\franchises of the main brokerage they belong to, and then subcontract a good part of the administrative duties back to the main brokerage for a fee.

Since they are still classified as brokerages, the mini-brokerages still need someone with a broker-of-record licence.

“This program really is the best of both worlds for agents who want the benefits of operating as a corporation but who want to offset many of the administrative duties that come with operating a brokerage,” says Sandhu. “Still, the agent is responsible to make sure everything is done properly before they sign off on it. At the end of the day, it’s their name and responsibility.”

Sandhu also cautions that while on the surface the program appears to be simple, behind the scenes are extensive rules and regulations that need to be followed. As he says, the incorporated agents and teams are being called mini-brokerages but they’re effectively full-fledged brokerages.

He also says the fees being paid to Re/Max don’t change and that the fees charged for the administrative work are negotiated between the main franchise and mini-franchise agent.

“This is meant as a value-add for our Realtors and brokers, not to generate more money for Re/Max Integra,” says Sandhu.

RECO deputy registrar Bruce Matthews says that under the Real Estate and Business Brokers Act, 2002 (REBBA), individual salespeople are not allowed to operate as a corporation. In addressing the years of lobbying, Matthews says it’s important to remember that while RECO’s mandate is to promote consumer protection through a fair, safe and informed real estate marketplace, RECO is delegated by the provincial government to administer the REBBA, not make the rules.

“Our responsibility is to administer what the government lays out,” says Matthews. “If the industry wants the rules to change, it’s the government they should be lobbying.”

Matthews says Re/Max’s Agent Brokerage Program, as he understands it, doesn’t appear to violate anything in the current REBBA. But he warns the mini-brokerage will be treated as a regular stand-alone brokerage and subject to all of the requirements such as registration, having a broker of record licence and proper insurance and it will ultimately be held liable for their conduct.

“And from a consumer protection stand-point, that’s my ultimate concern,” says Matthews. “Our current structure makes the individual salesperson directly accountable for their own conduct. I don’t want anyone to be able to distance themselves from liability by operating as a corporate business.”

 

16 COMMENTS

  1. It never ceases to amaze me, the people who come out of the wood-work to comment on what’s going on within organized real estate — in terms of what can the motivation be.

    Take the contributions submitted herein by “Ian”. Ian apparently has a hard-spot for some real estate practitioners. He’s expressing concern that some may now be in a position to get one-up on the Canada Revenue Agency; whereas, I tend to believe that the Canada Revenue Agency is invincible. Conversely, Ian seems to have a soft-spot (expressed elsewhere) for professional wrestling. If Ian could accept that the Canada Revenue Agency is every bit as formidable as a Champion Professional Wrestler, he would realize that his points regarding this article are moot.

  2. This is called a tax break for the rich, that’s all it is and it is a way to circumvent tax laws.

    If you want to have a company and shelter the taxes then OPEN YOUR OWN BUSINESS. When a lawyer or accountant does it they have to deal with all the regulatory stuff from it. What Re/Max is doing is letting people incorporate themselves around tax laws where the “mini company” doesn’t have to deal with any of the administrative b.s. or any of the regulatory stuff that comes around with it.

    PURE AND SIMPLE, THEY FOUND A WAY TO HAVE THEIR CAKE AND EAT IT TOO.

  3. Ontario’s new Bill 69, the Tax Fairness for Realtors Act, proposes to amend the Real Estate and Business Brokers Act, 2002 to permit a personal real estate corporation to be registered as a broker or salesperson. A personal real estate corporation must be incorporated as a professional corporation under the Business Corporations Act and be authorized only to trade in real estate.
    In addition, the Bill will amend the Real Estate and Business Brokers Act, 2002 to permit a brokerage to pay commission or other remuneration to a personal real estate corporation of an individual broker or salesperson that it employs.
    Merv.

  4. What a bunch of B#%L [email protected]%T.
    The next thing RE/max will take credit for is inventing the wheel.
    What I don’t understand is why REM would publish this inaccuracy.
    I think REM owe the Real Estate industry a retraction and an apology.

  5. Tina Gardin, Broker/owner Sutton Quantum writes:

    Sutton has had this program in Ontario for a while so I am not sure why Re/max is tooting their horn as the pioneers of the concept. The ‎model is based on a new corporate entity that piggy backs on the original franchise to continue the economies of scale and gain a tax deferral; primarily for the team leader. This is hardly a solution for the general population of registrants as the sensational headline would suggest. This rather complex structure might be a consideration for the top 1 percent but what about the average Realtor? OREA needs to continue the lobby for Realtor incorporation and other unfair practices in Ontario. Our associations need to also focus on the claw back on RITC for large brokerages as well; the new double dipping formula. Realtors are just not getting a fair tax shake.

    • Tina and Jim:
      Thank you for the clarification.
      I will bet $$$’s to Tim’s holy donuts that OREA, CREA et al have made sure that ‘they’ get ‘their’ fair tax shake. Effectively looking after their financial supporters’ (your) tax interests? Not so much.
      Geez…I’ve got to get back to boat-building. Too much bull-shit going down at the top in the Organized Real Estate pig-pen. Need to sniff some good ol’ waterproof glue fumes to clear my head of this crap.

    • You want to have individual incorporation, then open your own company. That is what the REAL agents do. This is called getting the best of both worlds. Sheltering tax money that they SHOULD be paying to the government but without the responsibility of the trust accounts and everything else that actually owning a brokerage comes with.

      This is called TAX AVOIDANCE plain and simple. This devious practice should be stopped.

  6. This is such a scam…only if you make more that $500,000 does it have a benefit….it is just a tax deferral technique…good on remax to try to get credit for a good idea when it is not really much good….agents do your research..it is not probably not worth the start-up cost or provide sufficient savings

    • Bruce – Speaking of fair tax shakes:
      Since 1982 I have supported the 700 Club as one of many ways of giving back to the community. Some years I tithed to that system so sometimes cks were sizeable. I mention this for a reason.

      When at home I watched the early morning program and there was a special request for those wanting to help Israel, and CBC news had noted that it is well known that Harper supports Israel. I didn’t know that and thought it was an odd commentary.

      I wrote a ck and put it in the mail. About six weeks went by and the ck had not been cashed. Then an envelop arrived in the mail with a letter, enclosing my original ck, saying the ck could not be cashed as written. What? I checked for body and figures accuracy. Could not see anything out of order. So I called.

      The problem: I had written in the what for line at the bottom – in support of Israel project.

      CAN’T DO THAT IN CANADA!!!!
      Can’t accept a REALTOR donation with any kind of Israel notation indicated.

      Now it is important to note: I am apolitical. I don’t even follow politics in a general sense, only headlines in a general sense.
      Of course donations are tax write offs. But NOT THIS ONE!!! They are forbidden by Rev Can from even cashing the ck.

      I was never able to get to the bottom of that debacle.
      So I can’t even begin to wrap my head around what addt’l benefits being a sales rep on a team brokerage might encounter, except to say it will all be closely watched by big brother, and agents can expect to be challenged extensively for yrs to come, since the real estate industry seems to be especially targeted.

      Respectfully,
      Carolyne L

    • Bruce,

      It is worth it because there is no start up cost. You don’t have a brokerage that you are actually responsible for. You are basically running a satellite office. This is called TAX AVOIDANCE. Plain and simple. They get the benefits of a company and sheltering the income for tax purposes, but they don’t have to deal with the RECO and OREA stuff as the main brokerage deals with it and they have no trust accounts. This is called having your cake and eating it too. People spending money to find ways to avoid paying taxes ILLEGALLY.

  7. I´m sorry to break it to all of you, but an incorperated business person doesn´t do anything else as they did before, besides the fact that they are incorperated and thus defer taxes. This has been going on for years in BC and other provinces and didn´t affect the level of service or ethics the public is being provided.
    RE/MAX does what RE/MAX does. Evolve and adapt, innovate and lead in a business, please remember, once was led by a handful of big time companies taking half of the sales reps money away and living the good life. Now a days the majority of the money goes to the actual person fulfilling the publics´ need of service and most agents wouldn´t accept anything else.
    Can you remember that long forgotten time? Oh, yes, it was RE/MAX back then and I´m sure all people of all make ups, races, colors, believes and genders back then were screaming about the change that was coming down the pipe.

    • If you want to shelter the taxes, then open your own company.

      Why don’t they do that? The agents are either too chicken to go on their own and they don’t want to deal with the trust account and set up issues with owning your own real brokerage, these “mini-brokerages” are just scams to avoid taxes.

  8. I have a great idea, let’s get more “big” teams in the office so the leader can run his/her office out of the Brokerage….without the overhead…..and the team leader should negotiate a really high split for themselves and their team…..after all, why should the “team” have to pay anything…if this keeps up, there will be no Brokerages left- only Brokes – and my oh my, where will all these “big” teams go???

  9. How REMAX works after this announcement.

    ONE REMAX International Master Franchise
    70 REMAX Regional Sub-Franchises
    7000 REMAX Municipal (GEO-GRID) Sub-Franchises
    70,000 REMAX Agent Sub-Franchises
    ???????? Brand Using Agents
    So I am sure you will hear increased commentary from other Brands about the new REMAX “Pyramid Scheme”.

    And all you Agent Teams out there. Unless you are required to sign a FRANCHISE agreement you have no protection in this system.

    And all Municipal Sub-Franchisors you need to come together and seek legal changes to your Franchise agreements to protect yourself.

    This only benefits the TOP 2 TIERS of the system!

      • This will be great news for the consumer as REMAX has just opened a “Can of Worms” it has failed to recognize.
        When licensed real estate in Canada considers change they must first and foremost consider how they can be attacked by that change. Like Rogers and ComFREE attacked the MLS access or Point2 attacked realtor.ca, all in the last 2 years, this change opens an even bigger attack.
        REMAX has just thrown it’s existing franchisees under the bus and you can be sure Frank and Walter were not informed of how this just happened. They would never have agreed to it.

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