PREC for REALTORS® in Ontario: What You Can (and Cannot) Do — and How to Set It Up Properly

With rising tax rates and growing compliance requirements, many Ontario REALTORS® are turning to Personal Real Estate Corporations (PRECs) to manage income more efficiently. However, PRECs are highly regulated, and mistakes in registration, naming, or reporting can lead to RECO discipline, CRA reassessments, or lost tax benefits.

This guide explains:

• What a PREC is

• What types of corporations are allowed

• What a PREC can and cannot do

• Naming rules and restrictions

• Tax advantages and limitations

• Ongoing reporting requirements

• How TAX4LESS.CA specializes in PREC creation, filing, and tax planning

What Is a PREC?

A Personal Real Estate Corporation (PREC) is a special-purpose corporation that allows an Ontario REALTOR® to earn real estate commissions through a corporation instead of personally.

PRECs are governed by:

• Real Estate Council of Ontario (RECO)

• The Real Estate and Business Brokers Act, 2002 (REBBA)

• The Ontario Business Corporations Act

• The Canada Revenue Agency (CRA)

⚠️ A PREC is not a general business corporation. It exists only for real estate trading purposes and must follow strict rules.

What Type of Corporation Is Allowed for a PREC in Ontario?

Only the following structure is permitted:

✅ Ontario Corporation

• Must be incorporated in Ontario

• Federal corporations are NOT allowed

• Extra-provincial corporations are NOT allowed

✅ Ownership Rules

• 100% of shares must be owned by one registered REALTOR®

• No spouses, partners, children, or holding companies allowed

• No trust ownership permitted

What a PREC Can Do ✅

A properly registered PREC may:

✔️ Receive real estate commissions
✔️ Pay salary or dividends to the REALTOR®
✔️ Deduct eligible business expenses
✔️ Defer personal tax by retaining earnings
✔️ Fund retirement, investments, or future business growth
✔️ Improve cash-flow management and tax timing

What a PREC Cannot Do ❌

A PREC cannot:

❌ Trade in real estate other than through the brokerage
❌ Provide services unrelated to real estate trading
❌ Hold rental properties or flip properties
❌ Employ the REALTOR® as an independent contractor
❌ Share ownership with anyone else
❌ Operate multiple businesses
❌ Use the corporation for consulting, coaching, or investments

Using a PREC outside permitted activities is a serious RECO violation.

PREC Naming Rules (Very Strict)

Your PREC name must comply with RECO rules.

✅ Allowed Name Formats

• Legal Name (e.g., ABC Realty Inc.)

• Personal Name Only

  • “John Smith Real Estate Inc.”

  • “John Smith PREC”

❌ Not Allowed

• Team names

• Brand names

• Marketing slogans

• “Group”, “Team”, “Holdings”, “Investments”

• Anything misleading or unrelated

⚠️ The REALTOR®’s exact registered name must appear in the corporation name.

What Legal & Tax Protection Does a PREC Offer?

✅ Advantages

• Tax deferral (corporate tax rates lower than personal)

• Better income smoothing

• Flexibility between salary vs dividends

• Professional separation of income

• Enhanced audit structure when done correctly

⚠️ What It Does NOT Protect Against

• Personal liability from professional negligence

• Errors & omissions claims

• Discipline from RECO

A PREC is a tax planning tool, not a liability shield.

Reporting & Compliance Requirements for a PREC

🔹 RECO Requirements

• Annual PREC registration renewal

• Brokerage must be notified

• Corporation must remain compliant at all times

🔹 CRA Requirements

• T2 Corporate Tax Return (every year)

• T4 slips if salary is paid

• T5 slips if dividends are paid

• HST registration and filings (if applicable)

• Payroll remittances (if applicable)

Missing filings can result in penalties, interest, or loss of PREC eligibility.

Common PREC Mistakes We See (Costly 🚨)

• Using a federal corporation

• Adding a spouse “for tax reasons”

• Running rental or side businesses through PREC

• Improper salary/dividend mix

• Missing RECO renewals

• Poor bookkeeping leading to CRA reassessments

These mistakes often eliminate all tax benefits.

How TAX4LESS.CA Specializes in PRECs

At TAX4LESS.CA, we specialize in end-to-end PREC solutions for Ontario REALTORS®.

🔹 What We Do

✔️ Ontario PREC incorporation
✔️ RECO-compliant naming review
✔️ HST and payroll setup
✔️ Salary vs dividend optimization
✔️ Annual T2 corporate filings
✔️ Personal tax integration (T1)
✔️ Ongoing compliance & CRA support
✔️ Long-term tax-saving strategies

We don’t just file returns — we design tax strategies tailored to real estate professionals.

Why REALTORS® Choose TAX4LESS.CA

• ✅ Over 15 years of experience

• ✅ Deep specialization in real estate taxation

• ✅ Practical, CRA-defensive planning

• ✅ Clear explanations — no accounting jargon

• ✅ Cost-effective compared to traditional CPA firms

Many REALTORS® come to us after discovering their PREC was set up incorrectly elsewhere.

Contact TAX4LESS.CA

📍 TAX4LESS.CA INC.
📍 7777 Weston Road, Unit 230
📍 Vaughan, Ontario

🌐 Website: https://tax4less.ca
📞 Phone: 647-576-2380
✉️ Email: info@tax4less.ca

Final Word

A PREC can be a powerful tax tool — but only when structured and maintained correctly.
One mistake can cost tens of thousands in lost tax savings or penalties.

If you’re a REALTOR® considering a PREC — or already have one — professional guidance is not optional.

TAX4LESS.CA makes sure it’s done right the first time.