Legal Hotline Can a Commission be Paid to an LLC + Escrow FAQs?
February 6, 2024 Legal Updates MAR Legal Hotline
Question: Can commissions be paid to an LLC?
Answer: Whether commissions can be paid to an LLC depends on how the LLC is established and by whom. First and foremost, Massachusetts real estate licensing laws prohibit the sharing of fees, commissions, or other valuable consideration with an unlicensed individual. This restriction extends to corporate entities, such as LLCs, which must be validly licensed. For a corporation to become licensed, Massachusetts General Laws Chapter 112, Section 87UU mandates that a partner or officer of the corporation hold an individual broker’s license. This means that the corporate entity must have its own corporate broker’s license in addition to the officer’s individual broker’s license. If the principal no longer holds an active broker's license, the corporation also loses its valid license. As a result of this requirement, salespersons may never receive real estate commissions through an LLC or other corporate entity. For individuals with a broker's license, setting up an LLC to receive commissions is possible, provided the entity is properly licensed, which includes obtaining a separate broker bond.
Question: At what point should a check received with an offer be deposited?
Answer: The Regulations contained within 254 CMR 3.00 require that funds received during the pendency of a transaction be immediately deposited into a bank escrow account unless otherwise agreed to by the parties. Once the parties have entered into a binding contract for the purchase of a property, absent any agreement to the contrary, any monies received are required to be turned over to the broker and immediately deposited into an escrow account. Although the Regulations do not require earnest money deposit checks to be deposited prior to the seller’s acceptance of the offer, the receiving party of such funds must still take proper care to ensure the security of those funds until they are required to be deposited or returned to the issuing party.
Written by: Justin Davidson, General Counsel; Catherine Taylor, Associate Counsel; Kate Berard, Associate Counsel; and Jonathan Schreiber, Legislative & Regulatory Counsel.
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