Yes, family members can own non-voting, non-equity shares in a Personal Real Estate Corporation in Canada. This can allow the PREC to pay dividends to family members, potentially reducing the overall family tax burden through income splitting. However, this strategy is subject to the federal Tax on Split Income (TOSI) rules introduced in 2018, which require dividends paid to family members to be taxed at the highest marginal rate unless specific exemptions apply. The most common TOSI exemption is for family members who are actively involved in the business for 20 or more hours per week, or who have been actively involved for an average of 20 hours per week over any five years. Only the controlling shareholder - the licensed real estate professional - may hold voting equity shares of the PREC.

Upon successful incorporation of your Personal Real Estate Corporation in Canada, you will receive your official Certificate of Incorporation and Articles of Incorporation issued by the relevant provincial government authority. These documents confirm your corporation name, incorporation number, and the details of the controlling shareholder. You will also receive a federal Business Number (BN) from the Canada Revenue Agency, which is required to set up your corporate tax account and file your annual T2 Corporation Income Tax Return. All documents are delivered directly to your email in digital format for your convenience. You can use these documents to open a corporate bank account, notify your brokerage of your PREC, and begin receiving commission income through your corporation.

A Personal Real Estate Corporation is currently available in seven Canadian provinces: Ontario, British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, and Nova Scotia. British Columbia was the first province to allow PREC incorporation, with legislation in place since 2008. Ontario was among the later adopters, with PREC legislation taking effect on October 1, 2020. PRECs are not currently permitted in New Brunswick. The structure is not yet established in Prince Edward Island, Newfoundland and Labrador, Yukon, Nunavut, or the Northwest Territories. Provincial PREC rules, naming requirements, and regulatory approval processes vary by province, so it is important to follow the correct procedures in your specific jurisdiction.

A Personal Real Estate Corporation in Canada is taxed as a Canadian-Controlled Private Corporation (CCPC) and files an annual T2 Corporation Income Tax Return with the Canada Revenue Agency. The PREC pays the small business corporate tax rate on its first $500,000 of active business income - 12.2% in Ontario, 11% in British Columbia, with comparable rates in other provinces. Income above $500,000 is taxed at the general corporate tax rate. It is important to note that the small business deduction begins to be reduced when passive income earned inside the PREC exceeds $50,000 in a year and is fully eliminated when passive income reaches $150,000, which can affect high-income realtors who retain and invest significant earnings inside the corporation. When the controlling shareholder withdraws funds from the PREC as salary or dividends, that income is then taxed at the personal level, resulting in a deferral rather than a permanent tax saving. The PREC must also register for GST/HST if its taxable supplies exceed $30,000 annually and remit payroll source deductions if it pays salary to the controlling shareholder or employees.

The main disadvantages of a Personal Real Estate Corporation in Canada are the additional costs and compliance obligations that come with operating a corporation. A PREC must file an annual T2 Corporation Income Tax Return, maintain corporate minute books, and comply with provincial corporate legislation, which typically involves annual fees and accounting costs that can range from $1,500 to $3,000 or more per year. The tax deferral benefit of a PREC is most significant for real estate professionals earning above $100,000 annually - those with lower incomes may find the administrative costs outweigh the tax savings. Additionally, the controlling shareholder remains personally liable for their own real estate trading activities, as the PREC structure does not provide liability protection for professional errors. Withdrawing accumulated earnings from the PREC eventually triggers personal tax, so the benefit is a deferral rather than a permanent tax saving.