In recent years we have seen real estate teams grow in popularity, but they come in varying shapes and sizes, and offer both benefits and challenges. One issue for brokers to be mindful of when compensating teams is: Can a team be paid their commissions through an LLC. Here’s what you need to know:
In most circumstances paying commissions to a team through an LLC would be illegal. 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.
Article Courtesy of the MAR Legal Team