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Legal IssuesRELRA and incorporating… more than meets the eye!
So RELRA has been amended and real estate licensees can now form “qualified associations”… In other words, you can now incorporate! Licensees have been looking for this opportunity for years, and now here it is, ready for use! But what does it mean, really? hat benefits (if any) does it offer to brokers and agents, and are the benefits different? More importantly, what liabilities does it pose to brokers and agents?
Licensees should be aware that the broker will have the final say as to whether they will recognize and pay a “qualified association.” The new legislation defines a “qualified association” as a: corporation, limited liability partnership, limited partnership or limited liability company. Although RELRA now gives licensees the ability to form such a business entity, it does not carry with it the right to do so. Licensees who may want to (and may have valid business reasons to) incorporate will need to discuss their plans with their broker to get permission. Brokers will want to consider under what circumstances, if any, they will allow agents to incorporate, and under what circumstances, if any, they will prohibit incorporation.Â
Licensees, including brokers, need to consider what (and who) will be involved – and what (and whom) needs to be involved with forming a business entity. What safeguards will be in place when a member of the business entity wants to leave? What will the business entity do and not do? What steps need to be followed before a new member is invited to join? These are all very important questions to ask and consider, and licensees at all levels of practice should consider and discuss their options with the appropriate professional. Deciding on a business entity may involve tax advice that is best sought from an accountant or a tax lawyer, and the business model that you follow is advice best solicited from an attorney.Â
Remember, though, this new business entity should be invisible to the consumer. Licensees may not advertise its existence nor may they hold the qualified association out to the public as providing real estate-related services. Further, all of the members of the business entity must be licensees affiliated with the same broker. Don’t let your excitement for this new opportunity out-strip your business planning… Or you may need an attorney for a completely DIFFERENT reason!
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Brett Woodburn, Esq. is an attorney with Caldwell & Kearns and serves as general counsel to PAR. A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees and representing and defending real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. He routinely counsels employers on employee relations issues as one of the voices of the PAR Legal Hotline. |
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