Can a broker pay an agent through the agent's LLC?

Question

Does anyone do this in order to save on self employment taxes?

A few relevant statutes (that dont actually seem that relevant once you pick them apart) -->

TRELA §1101.651(b)

https://codes.findlaw.com/tx/occupations-code/occ-...

(a) A licensed broker may not pay a commission to or otherwise compensate a person directly or indirectly for performing an act of a broker unless the person is:

(1) a license holder

...so they can pay indirectly.. through the llc...

. [TRELA §1101.355(c)]

(c) A business entity that receives compensation on behalf of a license holder must be licensed as a broker under this chapter.

...right... that is the friggin broker..  no one can get compensation unless through a broker...

Todd Faulk · Answer

@Jim Bailey I do not think a broker can pay to an LLC.  I tried to set up an LLC as an agent and the rules said you have to be a broker to receive payments to an LLC (if I remember correctly).  It was a TAR rule I think.

I found this (from 2015_ http://texasrealest.com/2015/10/23/dba-vs-llc-in-b...

"On occasion, a license holder will attempt to use the name of an LLC or corporation as an additional DBA or assumed name of the broker and will submit a “Notice of DBA or Assumed Name” attempting to register that name with the Commission. The Commission, however, will reject such a form because an LLC or corporation cannot be a DBA of a broker. A legal entity must have its own broker’s license and a license holder cannot register the name as a DBA to avoid this requirement. "

Things might have changed, the best thing is to as your broker, or call the legal hotline.

(Disclaimer: I only looked up for Texas real estate)

John Franklin · Answer

Good question.  Thats how I operated my own real estate company tax wise 15 years ago but none of my agents were INCs/LLCs, so they were paid strictly as contractors and 1099d.

I’d ask my CPA relative to US tax compliance and I’d find an acknowledgement and interpretation from TREC relative to TX RELA compliance before jumping in.  That second one might be tough though.

Jim Bailey · Answer

I see nothing that bars a broker from paying their agent through an agent's owned company.

Does anyone do this? You can save a lot routing the commissions through an s-corp (LLC) and then paying yourself a dividend and a salary.