Licensing of LLC Formed for Tax Purposes
QUESTION: I am a licensed agent. I work for XYZ firm which has a designated broker-in-charge in my office. At the suggestion of my accountant, I formed a Limited Liability Company. I have asked my broker-in-charge at XYZ to pay my commissions to the LLC rather than to me. I recently hired a part-time assistant to work for my LLC. Does my LLC need to obtain a firm license from the North Carolina Real Estate Commission? If so, do I need to designate myself as the broker-in-charge for my LLC, even though all of our agency agreements are between XYZ and the various clients?
ANSWER: The answer to the first question is yes, you do need to obtain a firm license. Every business entity other than a sole proprietorship must obtain a firm license prior to engaging in business as a real estate broker. The receipt of compensation by the LLC is enough to trigger the obligation to obtain a license.
The answer to the second question is also yes. Rule A.0110 of the Real Estate Commission’s rules sets forth the general rule that every licensed real estate firm must designate a broker to serve as the broker-in-charge for each of its offices. Rule A.0110 (d) carves out an exception to the general rule: a firm does not need a broker-in-charge only if: (1) it was organized solely to receive income for services furnished by its qualifying broker through another firm or broker; (2) it is taxed as if it were a Subchapter S corporation; (3) it has no principal or branch office; and (4) it has no person associated with it other than its qualifying broker. Your accountant can tell you if your LLC is being taxed as if it were a Subchapter S Corporation. Regardless of his answer, the hiring of a part-time assistant by the LLC is sufficient to trigger an obligation to designate a broker-in-charge.
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