My wife and I each own 50% of the shares of a C corporation (no employees). Can the C Corporation search for and manage real estate for us without a real estate license?
So if you or your spouse are actually doing the work of managing the property that your corporation owns, there’s no need for a real estate license to be involved at all.
The general rule is that owners don’t need a real estate license to manage their own property. Furthermore, in most states, owners are free to hire someone to take care of property management issues on their behalf, without a license.
Now, read carefully:
Ohio Revised Code Section 4735.01(A) provides a list of activities that if performed for another for a fee requires a real estate license. This list includes anyone who “operates, manages, or rents, or offers or attempts to operate, manage, or rent other than as a custodian, caretaker, or janitor, any building or portions of buildings to the public as tenants.” Also included on the list of activities that require a license are any attempts to lease property, any acts directed at procuring tenants for a property, the negotiation of leases, or advertising or holding oneself out as in the business of leasing property.
Ohio Revised Code Section 4735.01(I) provides an exception for an individual who qualifies as a “regular employee” of the owner of the property. The Division of Real Estate and Professional Licensing detailed in their Fall 1998 Newsletter… the factors that will be considered to determine if an individual is a regular employee of the owner. The article lists the following factors:
- The employee is paid via a W-2 versus a 1099
- The employer pays all taxes
- The employer pays unemployment and worker’s compensation insurance
- The employer schedules the hours
If an individual qualifies as a regular employee of the owner, the individual can manage property for that owner without holding a real estate license. Otherwise, a real estate license is required.
The type of corporation makes no difference, in this regard. The differences between C corporations and S corporations are chiefly in how they and their owners are taxed, and who is allowed to own them. As far as the State of Ohio is concerned, for this purpose, an entity is an entity.
Let’s take a look at what you can and can’t do with your corporation:
- You can personally manage properties your corporation owns.
- You may have your corporation manage the property that you personally own, outside of the corporation without a license.
- Your corporation may manage companies that it owns, without a real estate license.
- You may hire an employee to manage properties that belong to you or to the corporation that you control.
- Your corporation may hire an employee to manage properties that belong to you or to the corporation, as long as you control it.
- Your corporation may hire you or your spouse as an owner/employee and you can do the work on that basis.
- You may not manage properties that don’t belong to you without a license.
- You may not hire someone to manage properties that don’t belong to you or your corporation unless someone involved has a license.
- If you do hire an employee, or your corporation hires an employee to do property management, you must pay that worker a salary, rather than a commission, and pay that individual on a W-2, withholding taxes, etc. You can’t do it on an independent contractor basis.
Hope that helps clarify things. If you are unsure about anything, though, you may want to contact the Ohio Department of Commerce, Division of Real Estate and Professional Licensing for a clarification.
Penalties for practicing real estate or property management without a license, outside of the exceptions laid out by law, are severe: $1,000 per day per infraction. And regulators are pretty aggressive about adding up infractions. When in doubt, get your own attorney on it, or get the Ohio Department of Commerce on record with some guidance.
Writing about personal finance and investments since 1999, Jason Van Steenwyk started as a reporter with Mutual Funds Magazine and served as editor of Investors’ Digest. He now publishes feature articles in many publications including Annuity Selling Guide, Bankrate.com, and more.