The PA stands for Professional Association, so the DDPR or the state allows you to operate as a corporation either under a PA or an LLC. Most agents like to be a PA, this way they can be taxed as a corporation, and they like to be treated as an S Corp to limit their self-employment taxes.
You should reach out to a tax expert who is familiar with working with REALTORS
Steps and Info from Florida Realtors: https://www.
By Joel Maxson
Sales associates and broker associates can practice real estate (and be paid) as individuals, or, if they follow the correct path, as a business entity. Here’s the route they must follow if they want to form a business entity.
ORLANDO, Fla. – Some types of Florida Realtors® Legal Hotline calls change according to how the real estate market is doing. But other trends remain constant through sellers’ markets, buyers’ markets, and even distressed property markets. One of our constant conversations, through good markets and bad, involves walking through the steps a sales associate or broker associate must take if they want to form a business entity to receive real estate commissions. Please note that this applies ONLY to sales associates and broker associates, not brokers of real estate brokerage firms.
Before we walk through the steps, let’s review the law that allows associates to form entities. Section 475.161, Florida Statutes, is a brief paragraph titled “Licensing of sales associates and broker associates.” An associate can always hold a license as an individual, in which case the license would just be the associate’s legal name. The statute also allows a license to be held as a Professional Corporation (PA), a Limited Liability Company (LLC) or a Professional Limited Liability Company (PLLC, which can also be abbreviated as PL). The name of the PA, LLC, or PLLC can only be the associate’s legal name as registered with the Florida Department of Business and Professional Regulation (DBPR). For example, if the license reads Wade Wilson before the entity is formed, then the name of the entity must be Wade Wilson, PA (or LLC, or PLLC).
So, what are the steps to properly set this entity up? The first step for a sales associate or broker associate to consider is whether this change is worth pursuing. The primary reason associates form these entities is as a vehicle for tax savings, so it may be worth running the numbers to see how much corporate deductions would save.
The second step is to decide whether to hire someone to set the entity up. For example, attorneys and CPAs can do the work for you. If you choose to do your own work, you’ll likely use the Division of Corporations’ helpful resources located on www.sunbiz.org. The “Start a Business” tab has both information and forms.
Please note that a PA is a type of corporation, so you’ll find paperwork to create a PA under the Florida profit corporation section. Similarly, a PLLC is a type of LLC. Although this is not a written part of the rule, our understanding is that the DBPR will be checking to confirm the associate is the only officer, director, member, or manager of the entity. Continuing our example, Wade Wilson could be the sole member of Wade Wilson LLC or PLLC, or the sole officer of Wade Wilson, PA.
The third step is to file licensing paperwork with the DBPR. Form RE 16 is a short form that allows an associate to add the entity designation to a license or remove it. You can find form RE 16 alongside all the other license-related forms at www.myfloridalicense.com.
The fourth and final step is to ensure everything is approved and complete by looking your license up on www.myfloridalicense.com. If you’ve done everything correctly, your license will now include the entity designation. Where it once said Wade Wilson, it will now read Wade Wilson PA (or LLC or PLLC or PL).
Once that is complete, any money you receive from real estate activity should go to the entity, whether it’s a commission, referral, or any other compensation. Should anyone question whether they are allowed to pay the entity, that’s also where you can direct them to confirm everything is in order
DBPR Info