Pros and Cons of PREC:

In the past year, there’s no disputing that real estate had been rough. If you have predicted the year’s rollercoaster events, the only wise counsel would have been to hold on to your socks, which will be a rocky trip. Ontario is a province in east-central Canada, and it is known for parliament hill’s Victorian architecture. Moreover, Personal real estate Corporation Ontario now can incorporate through PRECs, which has been available to realtors in other regions of the country for many years. The realtor stands to gain several benefits by forming a Personal Real Estate Corporation, or PREC. However, there are some additional problems to consider regarding real estate corporations. 


The list of pros for a PREC will include health spending, capital gains exemption, tax rearrangement and income splitting. 

  • Corporate taxes:

PRECs can benefit from corporation tax rates. This means that in states where the top marginal tax rate for individuals is over 53%, a realtor’s sole source of income from PREC income can reduce their corporation tax rate to around 12%. In some cases, the tax rate can exceed 26.5 percent, and it is usually much lower than if the income was earned personally. This is a substantial tax advantage if the income is held in the PREC and not dispersed to shareholders. Because personal taxes kick in once corporate earnings are transferred to shareholders, realtors who need all of their corporate income for personal use will be found by PREC, and it isn’t the best option for you.

  • Health spending account: 

PRECs can open a Health Savings Account (HSA). This permits people to be paid for medical expenses they have spent on their own. As a result, the personal tax hit on such expenses is reduced. This is true for all PREC staff, not just the realtor.

  • Tax deferral:

The corporate income is held in the Prec, and it can be used for investment purposes, such as a bond, debt, stock investments, and reinvested in the PREC. As long as funds are kept in the corporation, personal taxes do not apply. More money is available to invest since the corporation tax rate is lower. If the realtor does not wish to invest the funds in the PREC, they can start another organization and lend the funds to that corporation.


It is essential to consider the specifics of each realtor’s business. 

  • Compliance and administrative cost:

There are additional regulatory and administrative burdens to consider because the PREC is a company. In such a situation, it can imply more time and more money because you’ll almost certainly need expert support to set up your PREC.

  • Liability:

In general, personal real estate corporation Ontario will offer limited liability for shareholders. For PRECs, personal assets are still at risk in the event of malpractice. This is because the Real Estate Council of Ontario will still be dealing with the individual license holder directly to handle any offences.

  • Payroll and tax compliance:

With additional payroll and HST considerations to be measured, taxation gets slightly more problematic on several fronts.

Final thoughts:

Thus, there are more benefits to incorporation, and it will be your own decision that will decide the individual details of each realtor’s business. 

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