Paying Commissions to Affiliated Licenses
In the late 1970s and early 1980s many salespersons and associate brokers began to want to have their real estate commissions paid to a corporation or partnership in order to receive certain perceived business and tax advantages. Later, when Georgia created the limited liability company business entity, it was added to that list. Since the License Law permitted commissions to be paid only to licensed persons, the legislature changed the law to require such business entities also to be licensed as salespersons or associate brokers. That law (a) restricted the business entity to having only one licensed individual affiliated with the entity and (b) required that the licenses of both that entity and the individual licensee to be affiliated with the same broker.
That system worked well for many years. However, it did not permit more than one licensee to be an owner of such a business entity. Thus, family members working for the same team or teams could not have their commissions paid to a single such firm. For several years the Commission has sought to find a way to accommodate those differing methods of business operation. The new law eliminates the dual license requirement and permits such payments when the brokerage firm maintains and retains a written agreement that:
- authorizes the brokerage firm to pay the commission to the unlicensed firm,
- affirms that the individual licensee affiliated with the brokerage firm owns more than a 20 percent interest in the unlicensed firm,
- provides that the individual licensee earned the commission in behalf of the brokerage firm, and
- affirms that the unlicensed firm does not perform real estate brokerage activity. O.C.G.A. Section 43-40-25 (b) (17) (c):
Effective July 1, 2006, the License Law will no longer require a separate license for such business entities to be able to receive real estate commissions. On July 1, 2006, any such licenses already issued will terminate; and the Commission will issue no new such licenses. Brokers and their affiliate licensees who want commission paid to a separate business entity must then enter into new agreements as required by sub-paragraph (C) above.
The information contained in this article is believed to be current and accurate. The GREC staff reviews the contents periodically and updates it when appropriate. If you have questions or comments about this article, you may contact us at firstname.lastname@example.org . Last reviewed August, 2006.