Can a Texas real estate agent use an LLC for commissions?
Yes. As of January 1, 2024, the Texas Real Estate Commission (TREC) allows real estate agents to use an entity like a limited liability company (LLC) as a business structure. However, there are specific requirements that must be met in order to comply with TREC regulations.
This article outlines the new rules as well as the requirements that must be complied with before an agent can receive commissions through their LLC.
The old rule no longer applies as of January 1, 2024
The 2023 legislative session was a game-changer for Texas real estate agents. Prior to January 1, 2024, the Texas Real Estate License Act (TRELA) precluded real estate agents from utilizing an LLC to receive commissions from their sponsoring broker unless the LLC was licensed as a broker.
An LLC could only be licensed as a broker if (1) a broker owns at least 10% of the LLC or (2) the LLC is governed/controlled by a broker and the LLC maintains the required E&O insurance.
The new rule takes effect on January 1, 2024
Starting in 2024, real estate agents may use an entity (LLC or S-Corp) to receive commissions from their broker as long as the entity meets specific requirements.
Requirements for an agent’s LLC
Registration of LLC with TREC
Starting in 2024, licensed agents can submit an online application and supporting documentation to establish that the entity is eligible for registration.
Agents can submit their application to register an LLC or S-Corp with TREC online at www.trec.texas.gov. You will need to first log in as you would to manage your license. From the Quick Start Menu, select "Texas Real Estate Commission" and then "Business Entity Registration.
What supporting documentation does TREC require to register an LLC?
TREC will require the following documentation to register an LLC:
- Proof that the LLC exists: Certificate of Formation, Certificate of Amendment, or Certificate of Account Status
- Evidence that an agent owns at least 51% of the LLC: Company Agreement, Company Resolution, or K-1
When can an agent start using an LLC to receive compensation?
How will I know TREC has approved my LLC’s registration application?
What type of entity should an agent create?
The structure through which an agent can receive commissions from their broker must be either an LLC or an S-Corporation. An LLC is the most common entity choice for a small business, and we recommend the LLC over the S-Corp.
If S-Corp taxation is desired, an LLC can elect to be taxed like a S-Corp. Read more about LLC taxation.
Zachary Copp, Esq.