I am in the process of researching a new brokerage. My plan is to start a small office with only 3 agents to start (including myself). Of course, E&O insurance is a major concern. I'm wondering if I NEED to incorporate, or just go it as a sole propietor? I'm thinking if we are insured, and have a real estate attorney look over our transactions - we don't need the protection of incorporation... or do we? Any comments?

Absolutely without a doubt!! Incorporate!

At least do an LLC. Its not that much money and the letters say it all: Limited Liability Company.

I strongly suggest some kind of incorporation plan. It is just too valuable a level of protection to not have.

R

Incorporation of some sort is almost mandatory if you form a brokerage... just crazy not to.

S-Corp or LLC which is Limited Liability Corporation NOT Company are often the better starting points. With the S-corp you can at a later date change to C-corp status if you wish but its not generally recommended based on how most brokerages are set up and the tax consequences and reporting.

Agreed. Incorporate immediately. I bought a brokerage from a person who was a sole proprietor for 16 years. I couldn't believe he exposed himself to all that liability for so long when incorporating is so cheap. One lawsuit and you're ruined. Do it.

Would someone list a few low cost LLC providers?
Thanks,
Bill

My grandfather became a broker right after WW2.

He stopped working in the business in 1983. He operated as a sole proprietor the entire time. I actually get chills when I consider the concept in todays world.

R

Here is a place a couple of friends have used.

http://www.activefilings.com/

From the Florida Broker's Guide published by Dearborn:
"Personal liability and income tax treatment are the two most important issues that affect a broker's choice of ownership structure. Many states, including Florida, have laws that enable businesses to operate as limited liability companies (LLCs). LLCs may register as real estate brokerage businesses.

LLCs provide the owners with protection from personal liability for business debts in the same way corporations do, but the IRS treats LLCs as partnerships for tax purposes. Income is taxed only once, as in a partnership, and an LLC has great flexibility in how it passes income and deductions to its members. LLCs may be an appealing alternative to S corporations or limited partnerships because a broker can avoid some of the restrictions imposed on S corporations regarding the number and type of stockholders, and he or she can limit the liability somewhat that otherwise exists in a limited partnership."

It's my impression that the State of California does not allow licensed professionals to form limited liability corps. Doctors, lawyers, and real estate salespersons are excluded from the limited liability option. We may form S or C corps, and, from what I've read, lawyers may form limited liability partnerships, not sure about agents. Be careful about using big online incorporation sites, as they are sometimes paper pushers and not state-by-state experts.

I've done both an LLC and Inc and would recommend an LLC for a small firm... mainly because of tax issues.

My atty advised that if someone wants to get to you they'll find a way and that an Inc. is only partially protective. There is no such thing as total & absolute protection.