We’ve been hearing from members asking about whether a business entity needs a broker’s license to receive compensation for real estate brokerage activity. For example, some brokers choose to operate their business as a corporation, and some sales agents want to receive commissions through a limited liability company (LLC) or S corporation for tax purposes. Currently the answer is yes, a business entity needs a broker’s license in both examples. However, starting on January 1, 2024, a new law will go into effect that creates an exception to the rule for certain business entities in the second example.
Under the new law, an LLC or S corporation that receives compensation on behalf of a license holder for work performed as a broker or sales agent is not required to be licensed under The Real Estate License Act as long as all these requirements are met:
- The entity is at least 51% owned by the license holder who earned the compensation
- The entity is registered with the Texas Real Estate Commission
- The entity does not engage in any other real estate brokerage activity.
TREC has proposed rules to implement the registration process, which are up for adoption on November 6, 2023. It is important to note that to qualify under the third requirement, the entity’s only role in any real estate transaction is to accept payment for brokerage services. If an entity is engaged in any other form of real estate brokerage activity, such as a broker or sales agent using the entity name in advertising or listing the entity name as the brokerage name on a listing agreement, that entity must be licensed by TREC.