A common misconception is that real estate professionals may only operate as a Professional Association or “PA” in Florida. However, according to Florida Statute 475.161, a broker associate or sales associate may be licensed as a professional corporation (PC), a limited liability company (LLC), or a professional limited liability company (PLLC), if such status has been authorized by the Department of State.
A license must be issued only in the licensee’s legal name and must include the entity designation (e.g., “LLC”), when applicable. Additionally, it is important to note that this statute applies specifically to real estate broker associates and sales associates.
Who Is a Real Estate Broker Associate?
A real estate broker associate, also known as an associate broker, is an individual who holds a real estate broker license and works under another managing broker. A broker associate will show properties to potential home buyers and will provide offers to sellers to consider. They will typically not supervise other broker associates.
Who Is a Real Estate Sales Associate?
Individuals who are licensed to represent buyers and sellers in real estate transactions are real estate sales associates or “agents.” They assist people with buying, selling, and renting different types of homes and properties. To become a real estate agent, an individual must complete a certain amount of educational requirements, complete an exam, and be issued a license by the state in which the agent will conduct business. Once the individual obtains the license as a real estate sales associate, they may join a real estate brokerage.
Who Is a Realtor?
In the real estate industry, if a licensed real estate agent or broker associate becomes a member of the National Association of Realtors (NAR), he or she may become a realtor. Members of the NAR must also follow a set of professional ethics guidelines to remain a member.
What Are the Benefits of Forming a Business Entity for a Real Estate Professional?
There are several benefits for real estate professionals to form an LLC, PLLC, or PC. First, these types of business entities limit the personal liability of the individual from business debts and claims. Second, there are tax advantages for forming entities such as these. Third, forming a business entity such as an LLC, PLLC, or PC can establish a greater sense of credibility for the real estate professional among his or her clients.
What Is the Difference between an LLC, PLLC, or PC?
- An LLC allows an individual to separate his or her personal assets from their business assets. Thus, if there is litigation against the LLC, the individual’s personal assets are protected. Additionally, LLCs maintain the benefits of “pass-through taxation,” which allows business profits (or losses) to pass through the business to the individual’s personal tax return.
- A PLLC differs slightly from LLCs in that only licensed professionals can become members of a PLLC. These include real estate broker associates, real estate sales associates, and realtors. A PLLC also cannot be used to shield a member from a claim of malpractice against him or her. However, a claim of malpractice against one member does not create liability against other members.
- A PC has benefits for protection against personal liability that are similar to LLCs and PLLCs. However, an important distinction for a PC is that this type of business entity pays corporation taxes. Therefore, the real estate professional forming the PC essentially faces double taxation.
Which Type of Business Entity Should a Real Estate Professional Establish?
Choosing which business entity to form is an important decision as a business owner. Therefore, it is best to discuss your options with an attorney for sound advice and guidance in this process.