When Should a Realtor Incorporate a PREC and Use a Holding Company?
Many successful realtors wonder when it makes sense to go from sole proprietor to a Personal Real Estate Corporation (PREC). And once you do, how or when should you layer in a holding company to manage investments and wealth?
As a North Vancouver CPA who works closely with realtor clients, I’ll walk you through the decision points, structural options, and a real-world example.
What Is a PREC and Why It Exists
A PREC is a corporation allowed for realtors in BC. Instead of earning commissions personally, you earn them through your corporation, giving you more flexibility in how you withdraw income and accumulate profits. It is recognized by the Real Estate Council of BC and treated by the CRA as a regular corporation, so you still file corporate tax returns and follow standard rules.
The goal is not to change what you do, but how your income flows. This creates flexibility, tax deferral opportunities, and a better foundation for long-term planning.
When It Begins to Make Sense
Incorporation is not just about income levels. It’s about what you do with your profits after covering expenses.
If your net income is under $80,000 to $100,000, the extra administrative and compliance costs may outweigh the benefit.
If you consistently generate profit that you reinvest, such as real estate or investments, incorporation becomes valuable.
Lifestyle matters too. Someone earning $1 million who spends every cent will not benefit much. Incorporation helps when you build capital, not when you consume it.
It’s less about a minimum threshold and more about your ability to save and invest profit rather than spend it immediately.
Benefits
Asset separation to reduce business risk.
Flexibility in distributing or reinvesting profits.
Opportunity to use the lifetime capital gains exemption or small business deduction (though rarely applicable to realtors).
Lower small business tax rate on the first $500,000 of active business income, which provides significant tax deferral.
Be aware that CRA rules on passive income and the small business deduction can affect this structure. It should be planned carefully.
Real-World Example
A realtor I’ve worked with in the Vancouver area built his structure to hold most of his wealth in a holding company while running his active business through a PREC.
We meet jointly with his financial advisor twice a year, which helps keep planning consistent. After our last meeting, he texted me to thank me for setting up the joint meeting and providing precise guidance on his next steps for the upcoming tax year.
This kind of success shows how intentional planning can turn a structure into a strategic tool rather than just an accounting exercise.
Risks and Trade-Offs
Before incorporating or setting up a holding company, consider:
Added accounting and legal costs.
Complexity in accessing funds personally (payroll vs dividends)
Passive income rules that can reduce small business deductions - There is a maximum threshold of investment income you can generate at the corporate level before tax rates increase.
Reduced flexibility if you need to restructure later.
The importance of keeping personal and corporate finances completely separate.
Having your accountant model scenarios and explain the trade-offs helps you make the right call for your situation.
Final Thoughts
If you’re a realtor in Vancouver or North Vancouver thinking about a PREC or holding company, the best structure depends on your income profile, investment habits, and long-term goals.
If you’d like to explore whether incorporation makes sense for you, reach out any time. I’m happy to walk through examples and help you plan the right structure for your business.