Do I need to be the BIC of an LLC set up to receive sales commissions?
QUESTION: My accountant recommended that I create a limited liability company (“LLC”) for the purpose of receiving my sales commissions. He said that I could save some money on taxes and save for retirement with a Simplified Employee Pension Plan. If I set up an LLC, do I need to be licensed by the NC Real Estate Commission? Do I need to designate myself as the broker-in-charge (“BIC”) of the LLC?
ANSWER: Your LLC will need to be licensed, but according to Rule 58A.0110(c), you do not need to designate a BIC as long as your LLC: “(1) is organized for the sole purpose of receiving compensation for brokerage services furnished by its qualifying broker through another firm or broker; (2) is treated for tax purposes as a Subchapter S corporation by the United States Internal Revenue Service; (3) has no principal or branch office; and (4) has no licensed or unlicensed person associated with it other than its qualifying broker.” Under Rule 58A.0502(e)(2), the qualifying broker of such an LLC cannot be a provisional broker and must be a manager of the LLC. The rules effectively prohibit a provisional broker from establishing a business entity to receive compensation.
Be sure to consult with both your accountant and your attorney to make sure that you are setting up your LLC, or other business entity, correctly. There are benefits to receiving your commissions through an LLC, but the risks may outweigh the benefits if you do not create and operate your company in compliance with the license and tax laws. For example, an LLC must be licensed before any commissions can be received by it.
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