A PREC Accountant for BC Realtors

For a one-owner BC realtor’s PREC, monthly bookkeeping, payroll and the year-end T2 with statements usually cost from $450 to $650 a month all-in. The year-end covers the T2 with Schedule 1 and Schedule 50, the CCA schedule, the small business deduction, T4 or T5 slips for the owner’s pay, and the instalments for the year ahead.

What changes on day one

Commission is now earned by the corporation rather than by you personally. That single change produces a short list of consequences that all arrive at once. You need a separate bank account and GST registered in the corporation’s name where you were registered personally (the CRA sets out when registration is required). Bookkeeping moves to a corporate standard, and there is a corporate tax return with its own filing and payment deadlines. The CRA’s description of corporation types is the starting point for what your company now is in tax terms.

None of it is difficult. All of it is cheaper to set up correctly in the first quarter than to reconstruct in the fourth.

The decision that costs the most to get wrong

Salary or dividends, or some mix. They are close to a wash on total tax by design; what differs is everything else attached to them.

That last row decides it for more realtors than the tax arithmetic does. If a mortgage application is likely in the next two years, the compensation decision is a financing decision first. Our salary versus dividends calculator will show you the shape of it before you speak to anyone.

The deferral is the whole point, and it is conditional

Money left inside the corporation is taxed at the corporate rate rather than your marginal personal rate, and the gap is the entire benefit of incorporating. It applies only to what you leave in. A realtor who draws every dollar of commission has a corporation that costs a return, a filing calendar and a fee, and returns nothing for them.

This is worth being blunt about because it is the one question a new PREC owner is least likely to be asked. Work out what you actually need to draw in a year first. If the answer is “all of it”, the honest advice may be that the corporation is premature, and the arithmetic behind that is published rather than kept as a sales tool.

Your new deadlines

A corporate return, GST filings on their own cycle, and either T4s or T5s depending on how you paid yourself. Instalments follow once the corporation owes enough. The CRA’s corporation payments guidance covers when payment is due, which is not the same date as when the return is due, a distinction that costs new corporations interest every year. Our T2 deadline calculator will give you your own dates from your year end, and the deadline hub lists the rest.

What a PREC accountant does for realtor clients

The corporate return and year-end statements, GST filings, the payroll or dividend paperwork for however you decided to pay yourself, and the compensation review once a year before the year closes rather than after. Bookkeeping if you want it — many realtors do their own and simply want it checked, which is a smaller and cheaper engagement, and we will say so rather than selling the larger one.

Fixed fees, quoted in writing before the work starts and published. A PREC with clean records and no employees sits at the lower end of the published range.

Money out that is not pay

The habit that causes the most trouble in a new PREC is carried over from personal practice: paying personal bills from the account the commission lands in. Once the commission belongs to the corporation, anything you take that is not declared as salary or a dividend is recorded as a shareholder loan. A loan that is still outstanding past the repayment deadline is added to your personal income, with no deduction to the company for it.

The fix is dull and effective. Pay yourself on a schedule, from the corporate account to your personal one, and spend from the personal account. Our guide to taking money out of a corporation sets out how the loan rules work and how an overdrawn balance is usually cleared at year end.

Expenses once the corporation pays them

Most of the costs you claimed as a sole proprietor move into the corporation: board and brokerage fees, licensing, marketing, a phone, and the vehicle. The vehicle is where the file is most often challenged. If the car stays in your name, the company usually reimburses you per kilometre from a log. If the company owns it, personal use becomes a taxable benefit to you. Either can work, but not both at once.

A log kept as you drive is the evidence that holds up; one rebuilt in April rarely does. The vehicle and mileage guide covers what it needs to show, and a home office used for the business is handled through the same reimbursement logic.

When the balance starts to build

A PREC that keeps more than it pays out begins to accumulate cash. In British Columbia, active business income within the $500,000 small business limit is taxed at a combined 11%, and that low rate is the engine of the deferral. Retained cash that is then invested can earn passive income, and enough passive income inside the corporation reduces access to the small business rate.

That is a planning problem for year three or four rather than year one, but it is cheaper to see coming. Retained earnings, explained and the passive income rules set out how the grind works.

Realtors across British Columbia

The PREC rules are provincial, so a realtor in Victoria and one in Kelowna work under the same framework, even if their markets move differently. We work with realtors across the province remotely, from Abbotsford, by video, phone and a secure upload link. City pages cover the local side: Vancouver, Surrey, Victoria and Kelowna. Our British Columbia page covers the wider practice.

More for realtors: accounting for realtors, real estate professionals, and if you also hold rental property. If your commission runs through a GST-registered corporation for the first time, the GST hub covers what changes.