This article is written for those on our LLC Sponsorship plan. Please review to make sure you’re in compliance with TREC rules for your brokerage.
Designated Supervisor
Every LLC must have at least one experienced agent to perform the designated supervisor role. Typically, this is the agent that owns the LLC but can be another experienced agent that works for the LLC. To be a designated supervisor (also referred to as delegated supervisor), an agent must take the Broker Responsibility course. This can be taken with any TREC approved training provider (see this article for a discount we’ve negotiated with an online provider). That agent must be indicated as the designated supervisor in the TREC online tool. To see how to do this, see the Designated Supervisor section here: https://eliteagents.cloud/transfer-agent-with-trec/
Policies and Procedures
It’s a legal requirement that you have a Policies and Procedures manual for your brokerage. To make things easy, we have a template available that you can use to create one. Just be sure to modify, add your company name where indicated, etc. Don’t simply download the templates and think you’re good to go. We will need a copy of your manual. See this article for more info and how to access the template: https://eliteagents.cloud/llc-policies-and-procedures/
Please also review the section on that page about the Policies and Procedures Acknowledgement form. We will need copies of those for every agent sponsored under your brokerage.
Agent Onboarding Docs
You need to have an independent contractor agreement in place with all of your agents. Additionally, TREC requires that each agent by provided with a scope of authorized activities in writing which should be included in your independent contractor agreement. The Texas Realtor Association provides a form that can be used that contains all of the required language and can be downloaded by clicking here. If you have a different contractor agreement you would like to use, please email us at [email protected] to confirm it has the TREC required language. Please see this page for more details on completing the agreement and other docs you should have in place.
Transaction Records
As outlined in our LLC sponsorship agreement, you must keep records of every transaction for at least 4 years. It’s up to you as to how you accomplish that but we highly recommend that you use some sort of transaction management system which will ensure you have the required documents for each transaction. You can see some recommendations of those systems in this article: https://eliteagents.cloud/biz-apps-and-services/
Advertising Rules
STOP using the words “Owner”, “President”, “CEO”, etc. in your email signatures and real estate advertising! It’s against TREC rules. Although you may indeed be the company owner, you cannot use that term in your advertising as TREC considers it to be confusing the public into thinking you have a broker license. Keep in mind that LLC sponsorship does NOT make you a broker. Using “owner”, etc., on legal documents is appropriate but not for advertising. It is your responsibility to be aware of and comply with all TREC rules including advertising rules.
NOTE: We’ve been told by TREC staff attorneys that you also cannot use the title of “Founder” in advertising.
Information About Brokerage Services (IABS)
This may seem inconsequential but it’s extremely important and will result in disciplinary actions if you have a TREC complaint. Be sure you have a properly completed IABS and that you have a link to it along with the TREC Consumer Protection Notice in your email signature, website, social media, and any other place considered the “first substantial” contact with potential clients. See this article for more info and how to complete your IABS form: https://eliteagents.cloud/how-to-complete-the-iabs-for-llcs/ Make sure all of your agents have a properly completed IABS as well.
Please see the following to learn the proper placement of the IABS: https://eliteagents.cloud/required-use-of-the-iabs-and-consumer-protection-notice/
Business Name
Unless you’ve also registered a DBA (assumed) name, you must use the exact legal company name as shown on the LLC license including the “LLC” abbreviation. If you want to shorten your company name or use a different one altogether, you have to verify the name you want to use is available and register it as an assumed name with the State first and then with TREC. See this article on how to do this correctly: https://eliteagents.cloud/using-a-dba-name/
Realtor Association and MLS Access
When your LLC license is issued, we must create an office account for your LLC with your local Realtor association. As explained before you signed up for LLC sponsorship, you will now have an office account in addition to your agent account. There will be an initial fee along with ongoing fees for the office account (varies by association). You are responsible for paying both the office account dues along with your agent account dues. Additionally, all of the agents you sponsor must be members of the association as well. There are no exceptions to this as the broker will be fined by our primary association for any agent you have that’s not a member. If you don’t pay your dues, the only option we have is to terminate your sponsorship – we don’t want to do that but it’s our only recourse.
As agents, you must be members of the association but access to the MLS is optional. There will be an additional fee for MLS access. If an agent doesn’t want/need MLS access, they do not have to pay for it but they do still have to pay the annual association dues. If you want MLS access, you’ll be paying multiple dues – the annual dues for the association and the quarterly or semi-annual dues for MLS access. Also be aware that some associations will charge MLS dues for your office account as well so be sure to budget and allow for these expenses.
Commission and 1099s
By law, all commission is technically paid to the broker. Regardless of how it may look at a closing, commission always flows from broker to broker and from broker down to agents. The title company is simply handling the passing of the commission from broker to agent via the commission disbursement authorization. This is why lease checks are always made out to the broker who in turn sends a check to their agent. Keep in mind in your case, your LLC is the broker and you as the “designated supervisor” of the brokerage have authority to issue CDAs.
Since your agents are independent contractors, you must keep a record of the commission being paid to them and report it to the IRS via form 1099 before the end of January each year. You must provide each agent with a form 1099-MISC for the commission they earned for the prior year while being sponsored by your LLC. For tax purposes, the flow of money goes like this: commission is paid to your LLC and then you pay the commission to your agent. If you don’t report it like this, it will be assumed that the commission just went to your LLC and you’re expected to pay the tax on it. Please discuss with your CPA and put in a system to file and send 1099s.
