What the PREC actually changes
Before October 1, 2020, an Ontario real estate registrant had to be paid personally: commissions landed on a personal tax return at personal rates. Ontario Regulation 536/20 changed that when it took effect on October 1, 2020, under the Act then called the Real Estate and Business Brokers Act, 2002, which was renamed the Trust in Real Estate Services Act, 2002 on December 1, 2023. Since then a registrant can be paid through a Personal Real Estate Corporation. Income earned in the corporation is taxed at corporate rates first, and money you do not need to live on can stay in the corporation, which is where the planning value comes from: deferral, timing of personal income, and, with proper advice, opportunities around how family members participate.
What it costs you in flexibility
The trade is strict structure. An ordinary corporation can have any shareholders, any board, any business. A PREC cannot. The controlling registrant must own all of the equity, be the sole director, and be the president and only officer. Non-equity shares may be held only by the registrant, their spouse, child or parent (directly or indirectly), or by individuals as trustees for the registrant’s minor children. To keep its exemption from registration, the corporation must not carry on the business of trading in real estate other than providing the registrant’s services to the brokerage, and its trading remuneration must come only from the brokerage. The regulation does not expressly prohibit a PREC from holding investments or a rental property, but buying and selling property as a business could be trading in real estate, and holding investments inside the corporation has tax consequences: passive investment income can reduce or eliminate the federal small business deduction (Ontario does not follow that reduction), and rental or investment income is generally income from a specified investment business or property, which does not qualify for that deduction at all. That is why many registrants keep those activities in a separate corporation, and why that decision belongs with your lawyer and CPA.
The decision is a math problem plus a discipline problem
Whether a PREC earns its keep depends mostly on how much of your commission income you can leave in the corporation. A registrant who spends everything they earn gains little from deferral, while one who can leave six figures inside the corporation each year has real planning room. Weigh against that the running costs: a corporate year end, a T2, payroll or dividend administration, and the one-time cost of setting the structure up properly. That arithmetic is a conversation with your CPA. The discipline problem is keeping the corporation inside its conditions once it exists, because the savings all assume the structure qualifies.
If you go ahead, the articles are where it starts
The conditions above are not just facts about behaviour; several reach into how the articles of incorporation are drafted. General-purpose incorporation defaults, unlimited business, flexible boards, standard share classes, work against them. Incorporating a new PREC properly is a $2,000 CAD flat engagement with us plus the government’s own filing fee, or your own lawyer can draft it; either way, the drafting deserves deliberate attention rather than a template. And if you already hold a corporation you believe is a PREC, the fastest reality check is reading its articles against the rules.
Not advice, and deliberately so
Whether a PREC is right for you depends on your income, your spending, your family, and your plans, none of which a web page knows. Treat this as the map, and your CPA and lawyer as the guides.
Capital Toolkit is an automated service. It provides general information, not legal, tax or accounting advice, and it does not replace your own lawyer or accountant. Have a qualified professional review any document before you rely on it, sign it or file it.