Can a Texas Real Estate Agent Get Paid Through an LLC?

Yes, a Texas real estate agent can get paid through an LLC, but forming the LLC isn't enough on its own. The entity has to be either registered with TREC to receive your commissions, or licensed as a real estate broker itself. Those are two very different setups, with very different requirements.

When an agent asks me this, that's the first thing I explain. Here's how each option works, who each one fits, and where agents get into trouble.

Which option fits you?

Option 1: Register your LLC with TREC to collect your commissions

This is the simpler route. Since January 2024, TREC has let license holders register an LLC or S corporation for one job only: receiving their pay. To qualify:

• The entity has to be an LLC or an S corporation. A corporation only qualifies if it has elected S-corp tax status with the IRS, and TREC asks for the accepted IRS Form 2553 as proof. A C corporation doesn't qualify.
• You have to own at least 51% of it.
• It can't do any other brokerage activity. It just receives your compensation.
• TREC has to approve the registration before you start using it.

You apply online through TREC's REALM Portal and provide proof that the entity exists and that you own at least 51% of it, like your Certificate of Formation and your company agreement. There's a TREC fee, and the registration has to be renewed like a license. Check TREC's current fee schedule for the amount.

Here's the part people miss: the money still comes through your sponsoring broker. Texas law says a sales agent can only accept pay for a real estate deal from their sponsoring broker. Registration just lets your broker pay your LLC instead of paying you personally.

Option 2: Get a business entity broker license

The second option turns your LLC or corporation into a brokerage. It takes a lot more work, but the entity can do more. TREC notes that a licensed entity can advertise under its own name and can be the party on a listing or buyer representation agreement. A registered entity can't.

Here's the order I'd do it in:

1. Form the entity. File your LLC or corporation with the Texas Secretary of State. How it's taxed (disregarded, S corp, or something else) doesn't matter for this license. TREC wants proof the entity can do business in Texas: a Franchise Tax Account Status page issued within 21 days of your application.
2. Get an EIN. That's an Employer Identification Number from the IRS. TREC doesn't list it as a requirement, but you'll want it to run the entity as a real business.
3. Pick a designated broker. This is the person who's responsible for the entity's brokerage activity. They need an active Texas broker license in good standing, and they need managing authority: a manager or managing member of an LLC, or an officer of a corporation. If you're a sales agent, that has to be someone else. (Not sure of the difference? Here's real estate agent vs. real estate broker.)
4. Put that role in writing. Your LLC's operating agreement, or your corporation's documents, should name the designated broker in that managing role. If those documents already exist, an amendment works, as long as everyone who needs to sign does.
5. Line up E&O insurance if it applies. If the designated broker owns less than 10% of the entity, TREC requires errors and omissions insurance (professional liability coverage) of at least $1 million per occurrence. If they own 10% or more, you show proof of ownership instead. So if you're using an outside broker who doesn't own part of your company, plan on the $1 million policy.
6. Apply with TREC. Submit the application, your documents, and the fee through the REALM Portal. Then wait for TREC to approve the license before the entity collects anything.

Getting licensed is only the beginning

Forming and licensing the entity is one thing. Running it is another.

When you're the business owner, everything falls on you. That can mean bookkeeping, payroll, taxes, invoicing, collections, managing agents, and compliance. All of it. That can be a lot for someone who hasn't owned a business before, or who doesn't fully understand what it takes to run one well.

How much of that lands on you depends on your setup. A registered LLC that only collects your commissions doesn't need a brokerage's back office. But if you're licensing an entity because you want to build a company, go in knowing the work doesn't stop once TREC approves the license.

Who actually benefits from an entity

Even a registered LLC that only collects commissions has one real benefit: it keeps your business money separate. With its own bank account, it's a lot easier to track expenses during the year and hand clean records to whoever does your taxes. But an LLC on its own doesn't lower your taxes, and it adds upkeep, like state filings and a second account to manage.

The bigger tax question is whether to elect S-corp status. My rule of thumb is to start that conversation once you're making about $50,000 a year in commissions. With an S corp, you pay yourself a reasonable salary through payroll and can take the rest as distributions, which can lower your overall tax bill.

That $50,000 is my experience talking, not an IRS rule. And it's commissions, not profit. What actually matters is what's left after your business expenses. An S corp also adds costs of its own, usually payroll, a separate business tax return, and more accounting work. For some agents, those costs eat the savings. Have a CPA run your real numbers before you elect anything.

A licensed entity adds two more things:

• Your own brand. Because the entity is the licensed brokerage, you can market under its own name instead of someone else's. You still have to follow TREC's advertising rules, like any brokerage.
• Contracts in the company's name. A licensed entity can be the party on listing and buyer representation agreements. A registered one can't.

One thing an LLC doesn't do is take you off the hook for your own work. Your license is still yours, and you're still responsible for how you handle your clients and your deals. If you want to know what an LLC does and doesn't protect, that's a question for an attorney.

Not everyone needs an entity. If real estate is a side business for you, or you've parked your license, an entity may just add cost. You can still ask your broker about a team or group name, and ask your CPA about simple ways to keep business expenses separate.

Don't market a compensation-only LLC as a brokerage

Registering your LLC doesn't make it a business you can advertise. You're still an agent under your brokerage, and that entity is only there to collect your commissions. TREC says advertising isn't permitted with a registration, and using the entity for any other brokerage activity counts as unlicensed activity.

If you want a name to market under, you've got two real choices:

• A licensed business entity broker, covered in Option 2 above. It can advertise under its own name, but it's still a brokerage, so TREC's advertising rules apply to it like any other.
• A team or group name under your broker. Under TREC's advertising rules, it has to end in "Team" or "Group," your broker has to register it, and your broker's name has to appear in your ads.

What to run past a CPA first

Talk to a CPA before you set anything up. An entity adds costs, and a CPA can tell you whether it actually pays for itself at your income level.

If you're considering an S corp, you definitely want a CPA involved. Depending on how your business is set up, that can include running payroll, filing the business's tax return, and keeping up with quarterly filings. Your CPA can tell you which of those apply to you.

TREC won't make this call for you either. It says it can't advise on what type of entity to form, and points people to their broker, a CPA, or a private attorney.

Where to go from here

If registration covers what you need, start with your current broker, since they're the one who'll be paying your LLC. If you want a licensed entity and need a designated broker for it, that's what our LLC / Corp brokerage program is set up for.

Have a question about your situation? Call us at 214-396-7998. We return your call within 1 business day if we're not able to answer. Or request a free info packet.