Opening a Firm
During the 1990s the Commission annually issued licenses to 600-700 new active real estate brokerage firms. In each of those years, an average of 300-400 active real estate firms have gone out of business. While some of these closings undoubtedly resulted from retirement, mergers, and weak local real estate markets, many of these firms probably closed due to poor business planning and shortage of operating capital. Thus, the decision to open a real estate firm requires careful planning and a critical evaluation of the broker's financial position. You should review the "Points to Consider When Starting a Brokerage Firm" section below prior to starting the application.
The application requirements vary depending on the type of business ownership that you plan. Details for completing and submitting the application can be found within the application that can be downloaded via the link below:
Points to Consider When Starting a Brokerage Firm
In deciding whether to start a brokerage firm, a licensee faces several important issues beyond obtaining a licenses from the Commission. The important issues for consideration and resulting action include:
- obtaining a business license from the local government;
- selecting a market area and a specific location for the office in that market area;
- securing telephone services and furnishings for the office;
- obtaining proper insurance for the business including an errors and omissions policy;
- developing a bookkeeping system suited to the firm's needs, IRS requirements, and the Commission's trust account regulations;
- obtaining a tax identification number from the IRS;
- obtaining forms for reporting income and withholding and F.I.C.A. taxes to the IRS and worker's compensation for covered employees to the State Labor Department;
- developing a record-keeping system for contracts and other documents as required by the license law;
- developing or obtaining sales and listing contracts approved by an attorney;
- developing employment or independent contractor agreements for licensees affiliating with the firm;
- planning the nature and scope of the business for specializing in residential sales, property management, commercial sales, or a combination of these markets;
- deciding whether to organize the firm as a sole proprietorship, a partnership, a limited liability company, or a corporation;
- developing a plan for advertising the new company and specific properties listed for sale of lease;
- developing a plan for the orderly recruiting and training of agents for the firm;
- planning a marketing strategy for the service area; and
- developing an office agency policy as required by the Brokerage Relationships in Real Estate Transactions Act.
Properly addressing these concerns often requires the assistance of professionals such as attorneys, accountants, and other licensees who operate existing brokerage firms. Simply passing the broker's licensing examination and paying the fee to license a firm is not enough.