Many real estate agents and brokers consider forming a Limited Liability Company (LLC) to reduce tax liability, protect personal assets, and streamline business operations. A common question arises:
Can real estate commissions be paid to an LLC?
The short answer: Yes — in many states, real estate commissions can be paid to an LLC, but only if the LLC is properly registered, licensed (where required), and complies with state real estate laws.
In this article, we’ll cover:
- Whether real estate commissions can be paid to an LLC
- State requirements and licensing rules
- Benefits of receiving commissions through an LLC
- Risks of improper LLC use
- How to set up your LLC for real estate commissions
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Can Real Estate Commissions Be Paid to an LLC?
Yes — but it depends on your state’s regulations and how your LLC is structured.
In most states, a licensed real estate agent or broker can receive commissions through an LLC if:
- The LLC is owned entirely by licensed real estate professionals
- The LLC is properly registered in the state
- The state allows entities to receive commission payments
- The LLC is disclosed to the broker of record and the real estate board (if required)
Some states — like California, Texas, and New York — have strict rules requiring that the LLC itself also be licensed as a real estate entity or professional corporation.
Always check with your state’s real estate commission or licensing board before accepting commission payments through an LLC.
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State Licensing Requirements (Examples)
State | LLC Can Receive Commissions? | Notes |
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California | No (must be PC) | Only licensed individuals and corporations can receive commissions |
Texas | Yes (with restrictions) | LLC must be owned by licensed brokers/agents and approved by TREC |
Florida | Yes | Allowed if LLC is properly structured and owned by licensees |
New York | Yes (but must be licensed) | Must register as a professional entity and be approved by the DOS |
Georgia | Yes | LLC must be registered and include licensed members |
Note: These rules change frequently — consult your local real estate commission or an attorney for updated guidance.
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Who Should Use an LLC for Real Estate Commissions?
Forming an LLC is especially beneficial for:
- Solo agents looking to streamline tax filings
- Real estate teams or partnerships
- Brokers who want to separate personal and business finances
- Agents building a long-term brand or real estate company
An LLC can reduce liability and open the door to more favorable tax treatments, such as S-corp election.
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Benefits of Receiving Commissions Through an LLC
- Pass-through taxation (or potential S-Corp savings)
- Separation of personal and business assets
- Simplified accounting and expense tracking
- Easier growth and branding under an entity name
- Enhanced legal protection in case of lawsuits
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Risks of Paying Commissions to an Unlicensed LLC
- Violating state real estate licensing laws
- Risk of losing your real estate license
- Delayed or denied payments from brokers
- Possible IRS audits for misreported income
- Penalties for unlicensed practice of real estate
To avoid these issues, always ensure your LLC:
- Is properly formed in your state
- Is registered (and licensed, if required) with the real estate board
- Is fully owned by licensed agents or brokers
- Is disclosed to your sponsoring broker
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How to Set Up an LLC to Receive Real Estate Commissions
- Choose a name for your real estate LLC (check availability)
- Register the LLC in your state through the Secretary of State
- Obtain an EIN (Employer Identification Number) from the IRS
- Draft an Operating Agreement
- Check with your state’s real estate commission for licensing needs
- Inform your sponsoring broker of the new entity
- Set up a business bank account to receive commission deposits
- Consult a CPA to explore S-Corp election if tax savings are desired
Need help with this process? FormLLC can form your real estate LLC, file for an EIN, and guide you through compliance steps.
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Tip: Consider naming your LLC something professional and brand-friendly, like “Smith Realty Group LLC” — especially if you plan to grow your business.
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Final Thoughts
Yes, in many cases, real estate commissions can be paid to an LLC — but only when state laws and licensing requirements are fully met.
Using an LLC can offer tax savings, liability protection, and professional credibility. However, improper setup or failure to register your LLC could lead to fines or lost commissions.
Be sure to check with your local real estate commission or an attorney before receiving any payments through an LLC.
Looking to start your real estate LLC? FormLLC helps agents form their business, get an EIN, and stay compliant with federal and state rules.
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