A personal real estate corporation, or PREC, is a corporation that lets a licensed Ontario real estate agent receive their commission income through a company instead of personally. It is mainly a tax planning tool. It can defer tax and, in narrow cases, split income, but it does not give you a licence to trade through a company and it does not shield you from the professional liability that comes with your own deals.
Ontario allowed PRECs starting October 1, 2020. If you earn well above what you spend each year and your brokerage agrees to pay your corporation, a PREC can save you real money. If your income is modest or you spend most of what you make, it usually adds cost without a benefit. This guide explains what a PREC does, what it does not do, the exact Ontario rules, what setup costs at our firm, and how to decide if it fits you.
What is a personal real estate corporation in Ontario?
A PREC is a corporation set up under the Ontario Business Corporations Act that a registered real estate agent uses to receive the remuneration they earn at their brokerage. Ontario allowed PRECs through Ontario Regulation 536/20 under the Trust in Real Estate Services Act, 2020, which most people call TRESA. Before that, agents had to take their commissions personally and pay tax at personal rates.
A PREC is narrow by design. It is not licensed to trade in real estate. You still hold your own registration with the Real Estate Council of Ontario, known as RECO, you still work through a brokerage, and your clients still deal with you, not your company. The only thing the corporation does is collect income you have already earned, so you can decide how and when to pay yourself.
One detail trips people up. A PREC is not a professional corporation in the way a law or medical practice incorporates. RECO confirms a PREC is not a professional corporation under the Business Corporations Act and is exempt from registration, as long as it stays inside the rules. If you want to understand the broader options first, our guide on choosing a business structure sets out how a corporation compares to the alternatives.
What a PREC is not
It helps to clear up three myths before you spend a dollar incorporating.
A PREC is not a way to advertise under a company name. RECO is clear that the corporation cannot be promoted as carrying on the business of trading in real estate, which means the PREC name stays off your listings, signs, and business cards.
A PREC is not a second registration. You do not register the company with RECO as a brokerage or a registrant. You notify RECO that it exists, which is a different and much smaller step.
A PREC is not a liability shield for your real estate work. More on that next, because it is the assumption we correct most often.
Does a PREC protect you from liability?
Mostly no, and this is the point worth slowing down on. If a deal goes wrong and a client sues over something you did as their agent, incorporating does not put your personal assets out of reach. You remain personally registered with RECO, you remain personally accountable under TRESA, and RECO can discipline both you and your PREC for misconduct. The corporation does not absorb your professional responsibility.
This is the opposite of what many online guides say. You will read that a PREC works like any corporation and shields your home and savings from a lawsuit. For the liability that actually matters to an agent, a negligence claim or a RECO complaint arising from a transaction, that is not how it works.
Where a PREC can offer some separation is on the ordinary business side, things like office leases, equipment, or contracts the company signs in its own name. Even there the protection is limited, because lenders and landlords often ask the controlling shareholder for a personal guarantee. The errors and omissions coverage every Ontario agent carries through RECO does the real work of protecting you on the deal side, not the corporate structure.
“The first thing I tell an agent is that a PREC is about when you pay tax, not whether you are protected. Most people arrive believing the company will shield them in a lawsuit. It will not. What it can do is give you control over your income, and for the right agent that control is worth a great deal.”
Demet Altunbulakli, Founding Lawyer, Insight Law Professional Corporation
What are the real tax advantages of a PREC?
The honest answer is that a PREC is a tax timing tool, and for the right agent that is genuinely valuable. There are two real benefits and one that is widely oversold.
Lower tax on income you leave in the company
Money your PREC earns and keeps is taxed at the Ontario small business corporate rate rather than your personal rate. On the first 500,000 dollars of active business income, the combined federal and Ontario rate is 12.2 percent. Ontario’s 2026 budget reduced the provincial small business rate, which brings the combined rate down to 11.2 percent once the change takes full effect on July 1, 2026. Compare that to a top personal marginal rate of 53.53 percent in Ontario, and you can see the gap.
Commission income counts as active business income, so it qualifies for the small business rate. These figures are current as of June 2026. Rates and thresholds change, so confirm the numbers with your accountant before you rely on them.
Tax deferral
The low corporate rate only helps if you can leave money in the company. If you earn 300,000 dollars and you need all of it to live, a PREC does little for you, because you pay it all out as salary or dividends and it gets taxed in your hands anyway. If you earn well above what you spend, you can leave the surplus in the corporation, pay the low corporate rate now, invest it, and pay yourself in leaner years or in retirement when your personal rate may be lower. That deferral is the core reason agents incorporate.
Income splitting, with a large caveat
This is the oversold one. Yes, your PREC can issue shares to family members. No, that usually does not let you pay dividends to a spouse or adult child and have them taxed at a low rate. The federal tax on split income rules, known as TOSI, tax most dividends paid to family members who are not genuinely active in the business at the top marginal rate. A PREC earns its income from services, which means the common exception for an active corporation generally does not apply.
Splitting can still work in specific situations, for example a spouse who actually works in the business at least an average of 20 hours a week, or a shareholder who is 65 or older splitting with a spouse. Whether it works for you turns entirely on your facts, and this is a question for your accountant before you set up share classes you cannot use.
When is a PREC worth it?
A PREC pays off when you consistently earn more than you need to live on, plan to keep the surplus invested, and your brokerage agrees to pay your corporation. It rarely pays off when your income is modest, when you spend close to everything you bring in, or when you are early in your career and your numbers swing year to year.
Here is the comparison we walk new clients through.
| Feature | Earning as a sole proprietor | Earning through a PREC |
|---|---|---|
| How your income is taxed | At your personal rate, up to 53.53 percent | Small business rate on income kept in the company, roughly 11 to 12 percent, then personal tax when you withdraw it |
| Tax deferral | None, you are taxed on everything in the year you earn it | Available, you decide when to pay yourself |
| Liability for your deals | Personal | Still personal, a PREC does not change this |
| Income splitting | Very limited | Possible in narrow cases, blocked by TOSI in most |
| Setup cost | None beyond your registration | Incorporation plus legal setup, see costs below |
| Ongoing cost | Personal tax return | Corporate tax return, bookkeeping, annual filings |
| Brokerage cooperation | Not needed | Required, the brokerage must agree to pay your PREC |
A rough rule from our practice. If you are not leaving at least several tens of thousands of dollars in the company each year, the tax saving often will not cover the extra accounting and filing cost. The number is different for everyone, which is why the first conversation is about your income and your spending, not paperwork.
What rules must your PREC follow?
Ontario Regulation 536/20 sets strict conditions, and missing one can mean your brokerage cannot pay your corporation. The core requirements are straightforward once you see them together.
- The corporation must be incorporated or continued under the Ontario Business Corporations Act.
- You, the agent, must be the controlling shareholder and own all of the equity, meaning the voting shares.
- You must be the sole director and the president, and the only officer.
- You must be registered with RECO as a broker or salesperson.
- Family members may hold shares that do not carry votes. The regulation allows your spouse, children, and parents, or a trust for a minor child, to own those shares directly or indirectly.
- There can be no agreement that takes away or limits your control as director and officer. A unanimous shareholder agreement that restricts your powers is not allowed.
- The PREC name cannot appear in your advertising, and the company cannot be presented to the public as trading in real estate.
- Your brokerage has to agree to pay the PREC, and the written arrangement among you, your PREC, and the brokerage has to contain the content the regulation requires.
That last point surprises people. A brokerage is not required to pay a PREC. Some will, some will not, and some have their own form of agreement. Confirm this with your broker of record before you incorporate, not after.
How do you set up a PREC in Ontario?
Our process usually runs one to two weeks from the first call, and most of that is waiting on the name search and the brokerage sign off. Here is how it goes at our firm.
- Free 15 minute consultation. We confirm a PREC makes sense for your income and that your brokerage will pay one. If the numbers do not support it yet, we tell you.
- Confirm the brokerage will cooperate. You speak with your broker of record. We can review their PREC agreement or provide one that meets the regulation.
- Name search or numbered company. If you want a named corporation, we run a NUANS search to make sure the name is clear. Many agents choose a numbered company, which skips the search.
- Incorporate under the OBCA. We prepare your articles of incorporation with the share structure the regulation requires, you as the only voting shareholder and director, and family share classes if they fit your plan.
- Organize the corporation. We prepare your minute book, issue your shares, and complete the opening resolutions, so the company is properly constituted from day one.
- Notify RECO. You provide the legal name of your PREC and its address for service to RECO by email at [email protected]. There is no registration form and no RECO fee for this step.
- Set up the rest. You open a corporate bank account, get a business number from the Canada Revenue Agency, and bring your accountant in to handle payroll or dividends.
The incorporation filing itself is fast. Ontario processes electronic articles of incorporation through the Ontario Business Registry, often within a few business days. Our overview of business incorporation in Ontario walks through the mechanics in more detail.
What does a PREC cost to set up and maintain?
Plan for two kinds of cost, the one time setup and the yearly upkeep.
Setup at our firm is a fixed fee, typically in the range of 1,500 to 2,500 dollars plus disbursements, which covers the consultation, your articles of incorporation, the share structure, the minute book, and walking you through the RECO notice. On top of the legal fee, the Ontario government charges 300 dollars to file the articles, and a NUANS name search runs roughly 25 to 80 dollars if you want a named company. Those government figures are current as of June 2026.
The yearly upkeep is where agents sometimes underestimate. A PREC files its own corporate tax return every year, even in a year with no income. You will also pay for bookkeeping and, in most cases, an accountant to handle the corporate return and your salary or dividend mix. Budget for that ongoing cost when you decide whether a PREC is worth it, because it is the number that tips the math for lower earning agents.
Mistakes we see agents make with PRECs
Three come up again and again.
The first is incorporating before the brokerage agrees. We have seen an agent set up a corporation through an online service, then learn their brokerage would not pay a PREC, leaving them with a company they could not use the way they planned and a cleanup bill to wind it down. Confirm cooperation first.
The second is treating the PREC as a liability shield and easing up on care, coverage, or documentation on their deals. The corporate structure does not protect you from a claim about your own work, so nothing about your professional diligence should change.
The third is building a family share structure for income splitting that TOSI then blocks. Issuing shares to a spouse who does not work in the business, expecting low taxed dividends, often does not survive the split income rules, and you are left with a structure that cost money to build and delivers nothing. Get the tax advice before the shares are issued, not after.
These are patterns, not predictions. Every agent’s situation is different, and what went wrong for one person may never come up for you.
Frequently asked questions
Do I have to register my PREC with RECO?
No. A PREC is exempt from registration. You do not license the company. You notify RECO by emailing the legal name of the corporation and its address for service to [email protected]. Your own registration as an agent stays exactly as it is, and you keep working through your brokerage.
Can my brokerage refuse to pay my PREC?
Yes. A brokerage is not required to pay remuneration to a PREC. Some brokerages welcome it, others decline, and many have their own agreement they expect you to sign. This is why we tell agents to confirm with the broker of record before incorporating, because a corporation you cannot route income through is an expense with no benefit.
Can I put my PREC name on my business cards or listings?
No. The rules do not allow a PREC to be advertised or presented to the public as trading in real estate. You continue to market under your own registered name and your brokerage’s name. The corporation works quietly in the background to receive your income.
Will a PREC let me split income with my spouse?
Sometimes, but far less often than people expect. The federal tax on split income rules tax most dividends paid to family members who are not active in the business at the top rate. Because a PREC earns its income from services, the usual exception does not apply. Splitting can work where a family member genuinely works in the business or where an owner is 65 or older. Speak with your accountant about your specific facts before you set up family shares.
How much should I earn before a PREC makes sense?
There is no fixed line, because it depends on how much of your income you actually need to live on. The benefit comes from leaving surplus money in the company at the low corporate rate. If you spend nearly everything you earn, a PREC saves little and adds cost. If you regularly keep tens of thousands of dollars beyond your living expenses, the math starts to favour incorporating. We look at your real numbers in the first meeting.
Can I set up a PREC myself with an online service?
You can incorporate a company that way, but a PREC has specific share and control requirements under Ontario Regulation 536/20, and the agreement with your brokerage has to contain particular content. We regularly see online incorporations that miss the share structure or the family share rules, which means a fix later. Getting it right the first time is usually cheaper than correcting it.
The information provided above is of a general nature and should not be considered legal advice. Every transaction or circumstance is unique, and obtaining specific legal advice is necessary to address your particular requirements. Therefore, if you have any legal questions, it is recommended that you consult with a lawyer.
