How to Set Up a PREC in Ontario — 6 Steps (2026)

Ontario REALTORS registered with RECO can incorporate a Personal Real Estate Corporation (PREC) under the Trust in Real Estate Services Act, 2002 (TRESA) and have commissions paid to the PREC rather than personally — accessing the corporate small business tax rate of ~12.2% on the first $500,000 of active business income versus personal marginal rates that reach 53.53%. This 6-step guide walks the full setup Bader uses with Ontario REALTORS, including the TRESA control test, brokerage notice, and post-incorporation tax planning.

1. Step 1: Confirm REALTOR eligibility and TRESA control requirements

   Under Ontario Regulation 536/20 you must be an actively registered real estate salesperson or broker with RECO. The controlling registrant must be the sole director and sole holder of all voting (equity) shares of the PREC. Non-voting shares may be held by family members (spouse, parents, children) directly or through a family trust with those family members as beneficiaries. Two agents cannot share a PREC — each REALTOR needs a separate corporation.

2. Step 2: Incorporate the PREC (OBCA) with compliant share structure

   File Articles of Incorporation under the Ontario Business Corporations Act. The name must comply with RECO naming rules — cannot use REALTOR-like terms unless authorized. Share structure: one class of voting participating common shares (100% to the controlling REALTOR); one or more classes of non-voting participating shares available for family members or family trust; and optionally, retractable preferred shares for future estate freezes. Government filing fee $300 online.

3. Step 3: Notify RECO and update brokerage agreement

   PRECs are exempt from RECO registration but the controlling registrant must notify RECO of the PREC’s existence and confirm the corporation meets the TRESA requirements. Update the brokerage-REALTOR agreement to direct commissions to the PREC. The brokerage will require: certificate of incorporation, PREC name, business number, and the compliance attestation letter. Some brokerages require additional indemnity language.

4. Step 4: Open a corporate bank account and set up bookkeeping

   Open a business bank account in the PREC name with the certificate of incorporation, directors resolution appointing signing authority, and BN. Set up QBO or Xero with a chart of accounts for a professional service corporation. Establish a monthly workflow: bank reconciliation, HST tracking (if commissions exceed $30,000 in a rolling 12-month period), and shareholder loan account monitoring.

5. Step 5: Register CRA program accounts (BN, RC, RT, RP)

   Register the Business Number and RC (corporate income tax) account automatically at CRA. Register RT (HST) if annual commission revenue exceeds $30,000 (voluntary registration below that threshold is also possible for input tax credit recovery). Register RP (payroll) if you plan to pay yourself a salary; skip if you plan to compensate via dividend only. Do not register accounts you won’t use — nil-return filings create audit exposure.

6. Step 6: Set the annual compensation, tax, and compliance calendar

   Determine salary-versus-dividend mix with your CPA: salary generates RRSP room, CPP contributions, and personal tax deduction to the PREC; dividends do not. Model both against your personal cash needs and long-term retirement plan. Diarize: T2 corporate return (due 6 months post fiscal year end), Ontario annual return (via T2 attachment), HST returns (frequency depends on annual revenue), personal T1 with T4/T5 slips, PREC minute book updates, and annual RECO notice refresh.

Frequently Asked Questions

Can two REALTORS share one PREC in Ontario?

No. Under TRESA and Ontario Regulation 536/20 each PREC must have a single controlling registrant as sole director and sole holder of all voting shares. Two agents each need their own PREC.

Can my spouse be a shareholder of my PREC?

Yes, but only through non-voting shares. Voting shares must be 100% held by the controlling registrant. Non-voting shares can be held by the spouse, parents, children, or a family trust with those family members as beneficiaries. TOSI rules apply to any dividends paid to family members — most spouses without 20+ hour weekly involvement will be TOSI-limited to top-bracket dividend tax.

What is the tax saving from a PREC?

On the first $500,000 of active business income, the Ontario+federal combined corporate rate is approximately 12.2% versus personal marginal rates reaching 53.53% for income above ~$253K. A REALTOR retaining $150,000 of commissions in the PREC (rather than personally) saves roughly $40,000-$60,000 in the first year — assuming the retained income is not immediately withdrawn.

Do I need to register HST for my PREC?

Yes if commissions exceed $30,000 in a rolling 12-month period (mandatory registration). Below that threshold, voluntary registration is available and often worthwhile to recover input tax credits on business expenses.

How does a PREC affect my RECO insurance and errors-and-omissions?

The controlling registrant remains personally responsible for TRESA obligations and consumer protection duties. RECO E&O insurance continues in the individual’s name — the PREC does not replace personal accountability. Review your E&O policy with your broker to confirm PREC-earned commissions are covered.

Authoritative Sources

• RECO — Personal Real Estate Corporations
• Ontario Regulation 536/20
• Insight Accounting CPA — PREC Ontario 2026

Expanded technical guidance

Common pitfalls in setting up a PREC

• RECO registration lapse. The realtor must maintain personal registration with the Real Estate Council of Ontario (RECO) as the PREC’s sole voting shareholder. Lapsed personal registration voids the PREC’s ability to receive commission income under REBBA 2002 as amended.
• Non-equity family shareholders exceeding statutory limits. Ontario Reg. 536/20 permits family members to hold non-voting, non-equity shares in the PREC — but voting control and equity must remain with the RECO-registered realtor. Structures that hand equity to a spouse violate the regulation.
• Commissions paid to individual instead of PREC. The brokerage must remit commissions directly to the PREC’s business bank account. Commissions deposited to the realtor’s personal account first are treated as personal income, defeating the incorporation benefit.

Forms, filings, and deadlines

Incorporate via Ontario Business Registry (Ontario Business Corporations Act) with a name ending in “Personal Real Estate Corporation” or “PREC.” Notify RECO of PREC status via the realtor’s MyWeb portal. First T2 due 6 months after fiscal year-end. Register for HST (mandatory if commissions exceed $30,000 in any 4 consecutive quarters). Companion documents: PREC shareholders’ agreement, RECO PREC notification, brokerage authorization letter re-directing commission remittance, and CRA Business Number registration. Reference: RECO Registrant Bulletin 2020-6 (PREC Guidelines), Ontario Regulation 536/20 (Personal Real Estate Corporations), REBBA 2002 as amended.

Worked example — commission income above SBD threshold

Realtor’s gross commission $650,000. Personal expenses $150,000 (car, marketing, brokerage split); net PREC income $500,000. PREC taxed at CCPC rates: first $500,000 at combined 12.2%F + 3.2%O = 15.4% = $77,000; nothing above SBD. Realtor pays herself $150,000 salary; PREC retains $273,000 for reinvestment or dividend. Compared to unincorporated: $500K personal income taxed at combined marginal rates up to 53.53% Ontario top bracket. Deferral value: ~$100K first-year cash retained inside PREC.

Worked example — spousal income splitting via non-voting shares

PREC issues non-voting, non-equity Class B shares to spouse. Post-TOSI (2018) rules, dividends to non-active spouse are subject to top marginal rate under s. 120.4 unless an excluded-amount exception applies (over-65 spouse pension-splitting exception is common). Consult carefully — most spousal dividend strategies pre-TOSI no longer work.

Related Insight resources

Ontario realtors setting up a PREC should review the Ms. I SaaS case study for a comparable share-structuring pattern (s. 86 exchange) that also applies to PREC founder share issuance. For PREC-specific tax planning across property income vs commission income, see also how to preserve the CCPC small business deduction. RECO-compliant PRECs commonly pair with an Ontario holdco once retained earnings exceed the annual SBD threshold.