Personal Real Estate Corporations (PRECs)

What is a Professional Corporation

A professional corporation is a corporation that provides the services of a member of a profession that is regulated by a governing professional body. Certain regulated professions are permitted to form professional corporations under their governing regulations. REALTORS® are regulated by the Real Estate Council of Ontario (“RECO”) and are permitted to form PRECs under TRESA.

A professional corporation allows a professional to benefit from some of the tax advantages available to traditional private corporations, while protecting the public by ensuring that the professional remains professionally regulated, disciplinable, and liable in relation to the professional services provided through the professional corporation.


  • Only REALTORS® can be voting shareholders of a PREC.
  • Either the REALTOR® or the PREC or both are subject to the oversight and regulatory powers of RECO.
  • The PREC can only be used if specific rules and regulations are followed.
  • A PREC does not limit professional liability.



  • In Ontario combined federal and Ontario corporate tax rate is 12.5 per cent on the first $500,000 of active business income. Any income above $500,000, is taxed at the general corporate rate of 26.5 per cent. By contrast, the highest personal tax rate in Ontario is 53.53 per cent on income over $220,000.
  • By forming a PREC you are able to leave a portion of your business income in your PREC, deferring the personal taxes on this income until you decide when the PREC pays this to you as either a salary or dividend. Having more available to invest in the PREC allows you to earn more investment income and this builds your retirement portfolio more rapidly.
  • Deferring a portion of your current income also allows you to “smooth” the recognition of your career earnings over your lifetime. Shifting the recognition of personal taxable income from your peak earning years to your retirement years means that when you do eventually have the income paid to you by the PREC you’ll be subject to a lower marginal tax rate.


  • With a PREC you have a structure for potentially splitting the business income to achieve certain tax benefits by paying dividends to members of your family (18 years of age or older) actively involved in the business.
  • To pay dividends to your adult family members, they must become shareholders of your PREC.
  • Generally, if the family member receiving the dividend is actively involved in the business activities of the PREC (which the Canada Revenue Agency has indicated would be met if they work an average of 20 hours or more per week and which your advisors may wish to calculate flexibility), or is significantly contributing to the business, or if the controlling registrant is 65 years of age or older, then income splitting may be achieved.


  • Each individual resident in Canada may claim a Lifetime Capital Gain Exemption (LCGE) to shelter capital gains on the disposition of qualified small business corporation (QSBC) shares.
  • The LCGE was increased in 2014 to $800,000 for dispositions of QSBC shares and is indexed for the years after 2014 (for 2020 it is $883,384 and you can find the current year LCGE on the Canada Revenue Agency website).



  • PRECs are a separate entity from you as a real estate professional, which means that you are required to file a separate income tax return for your corporation. The obligation to file payroll and HST returns will shift from you personally to the PREC, so you will need to close the personal payroll and HST accounts once you have filed any final personal returns.
  • You will also be required to file a separate annual corporate return, in addition to the income tax return.
  • In addition, you will incur legal costs when you initially incorporate your business, prepare required PREC contracts, and on an ongoing basis to keep your corporation in good standing.


  • If you decide to operate your business through a PREC, you will remain personally liable for the services you provide to Ontario’s consumers and will be held accountable by RECO for breaches of TRESA and misconduct. 
  • A PREC is not a mechanism for avoiding professional liability. Simply put, whether or not your form a PREC, you are personally required to meet all professional obligations and responsibilities outlined in TRESA.


  • PREC regime follows the single registrant model. 
  • Each PREC may have only one REALTOR® associated with it, who must solely control the PREC.
  • As a result, the PREC may only receive compensation from the brokerage for trading in real estate conducted by the controlling REALTOR®, not on behalf of multiple REALTORS