Most real estate agents have a very special tax status. Ordinarily, they are classified as statutory independent contractors (also called statutory nonemployees) for federal tax purposes.
Is an agent an employee or independent contractor?
Generally stated, an independent contractor is a separate and distinct business. … An agent is a person or entity that can be an employee or independent contractor providing service for the principal on an ongoing basis. However, a totally independent third party can be an agent and nothing else.
Why are realtors independent contractors?
Pursuant to California B&P Code 10032, a real estate agent or salesperson may be classified as an independent contractor ONLY IF ALL three of the following conditions are met: … They derive substantially all of their compensation for services performed as a real estate agent rather than the number of hours worked.
Are real estate agents sole proprietors or independent contractors?
The vast majority of real estate agents who work as independent contractors for a real estate brokerage are sole proprietors. Many one-owner brokerage firms are also sole proprietorships. … A sole proprietorship is a one-owner business. Unlike a corporation, LLC, or partnership, it is not a separate legal entity.
What is the penalty for classifying an employee as an independent contractor?
Under Labor Code section 226.8, which prohibits the willful misclassification of individuals as independent contractors, there are civil penalties of between $5,000 and $25,000 per violation. Willful misclassification is defined as voluntarily and knowingly misclassifying an employee as an independent contractor.
Can you be an independent real estate agent?
A real estate agent can’t work independently; they must work for an employing broker. Brokers are responsible for their real estate agents’ actions. Requirements for acquiring a real estate salesperson’s license vary from state to state.
Is a salesperson an independent contractor?
A salesperson is an individual engaged in the selling of merchandise or services. The salesperson can be a common law employee, an independent contractor, an employee by specific statute, or an excluded employee by specific statute.
What does it mean to be an independent contractor in real estate?
Employee or Independent Contractor
An independent contractor is a person who provides services to a company but is not an employee of that company. … In real estate, agents are usually considered independent contractors working under the owner of the agency they are affiliated with.
Should I incorporate myself as a realtor?
New real estate agents would be wise to seriously consider incorporation. You may end up much better off at the end of the tax year. You’ll be protected against some types of liability from client claims. You’ll be able to arrange your expenses in a way that makes sense.