[Note: This article is not intended to cover every possible issue that a broker will or should consider when starting a firm. It does provide guidance for many of the basic issues that will commonly arise.]
You are an active broker and have your broker-in-charge designation and have thought about starting your own firm for a long time and have decided that now is the time to do it. Here are some things to consider when doing so.
Types of Firms
Sole Proprietorship: If your firm will be a sole proprietorship, then no additional real estate license will be required. If the name of your firm will not include your last name, then you must register the name of your firm with the Register of Deeds in each county where you intend to do business and retain the Assumed Name Certificate(s) in your records. For example, if your name is Jordan Greentree and your firm name will be Greentree Properties, then you will not have to register your firm name with the Register of Deeds because the name of your firm includes your last name. However, if you desire to call your firm Awesome Real Estate Consultants, then you must register this assumed name at the Register of Deeds in the counties where you will engage in real estate brokerage services.
Corporation, Subchapter S-Corp, LLC, Partnership: If your firm will be a corporation, subchapter S-corp, or LLC, then you will need to contact the Corporations Division of the Secretary of State’s office and set up the company. (See Firm License Application form for instructions on licensing a partnership.) After establishing the company with the Secretary of State (for which you may call upon the assistance of a lawyer), you must obtain a real estate broker license for the firm by submitting a firm license application to the Commission. Firm license application forms are available on the Commission’s website. If you are setting up a firm for the sole purpose of receiving sales commissions, you must still obtain a license for the firm before receiving any such sales commissions.
If you intend to collect trust monies (i.e. earnest money, rents, security deposits, etc.), you must set up a trust or escrow account designated as such. This means that you must visit a federally insured depository institution lawfully doing business in North Carolina and set up a basic checking account in the name of your firm. The title or subtitle of the account must include the words, “Trust Account” or “Escrow Account”, and these words must appear on the signature cards, checks and deposit tickets. The broker-in-charge of the firm must account for all trust account monies in accordance with Commission rules. This includes performing a complete trust account reconciliation on a monthly basis. If you have not taken the Commission’s Basic Trust Account Course, we recommend that you do so before handling trust monies. You are not required to have a trust or escrow account unless you are holding trust monies.
If you choose to operate your firm from your home or any other non-commercial setting, make sure that there are no zoning regulations or restrictive covenants which prohibit you from operating a real estate business from that location.
The Commission has no specifications for the size or shape of signs for a real estate office. For Sale and For Rent signs should clearly indicate the name of the firm so that prospective buyers and tenants will know that the sign and the telephone number on the sign belongs to a real estate broker.
If you actively engage in real estate brokerage activities, hold trust monies or have at least one associate, you must declare yourself Broker-In-Charge. You must have at least two years of real estate brokerage experience within the previous five years to be eligible to declare yourself broker-in-charge. You may do this by completing and submitting a Broker-In-Charge Declaration form available on the Commission’s website (www.ncrec.gov). If you have set up your firm for the sole purpose of receiving sales commissions and have no associates or trust monies, then you are not required to declare yourself broker-in-charge.
If you hire a provisional broker to work at your firm, you must actively supervise him or her. Therefore, you must provide a work space from which the provisional broker can conduct his or her business under your supervision. If you hire a full broker to work at your firm, the full broker may conduct his or her business from any location provided, however, make sure that they deliver to you all agency agreements, transaction documents and trust monies in a timely manner. Full brokers must visit or at least communicate with their corporate offices on a regular basis to inquire about mail, because the Commission corresponds with active licensees at their business addresses. Make sure that any broker you hire has a current, active license.
Continuing Education and License Renewal
As a broker-in-charge, you will be responsible for assuring that every broker associated with your firm completes eight (8) hours of continuing education by June 10 of each year and renews his or her license by June 30 of each year. Brokers who allow their licenses to expire or become inactive must cease all real estate brokerage activities immediately.
The only trade or business forms provided by the Real Estate Commission are the Residential Property Disclosure Statement and the Working With Real Estate Agents brochure. All other forms are available through the North Carolina Association of REALTORS®. If you are not a member of NCAR, you may contact the North Carolina Bar Association for any forms they have jointly-created or consult an attorney to draft any documents that you need.
This article came from the Feburary 2013-Vol43-3 edition of the bulletin.