Reprinted with permission from the California Dept. of Real Estate

It’s never too early or too late to start your succession planning. While there are multiple aspects of your company that may need planning should you want to retire, such as legal and tax ramifications, there are some considerations that you may wish to take when it comes to your company’s real estate license. First, ask yourself the following questions:

  1. Do my affiliated salespersons and/or broker associates perform licensed activities under my individual broker’s license or under a corporate license?
  2. When do I plan to retire?
  3. What steps must I take, or consider, before retiring?

For those who keep salespersons and broker associates acting as salespersons, directly under their individual broker’s license, each salesperson and broker associate must be changed to affiliate under the new incoming responsible broker to whom they will be affiliated. Depending on when you transfer your business, you may need to consider the length of time for processing salesperson change applications by visiting DRE’s website and navigating to the Current Processing Timeframes link. To significantly reduce processing time, it is recommended you make sales changes and broker associate notifications through DRE’s eLicensing system.

When corporations are the entity that keeps salespersons, generally no changes are needed for affiliated salespersons or broker associates when the designated officer retires or is replaced by another. This only applies, however, when the corporation remains in good standing and is under the control and supervision of a licensed, designated officer at all times. New designated officers must apply by submitting to DRE a Corporation License Application (RE 201), including a corporate resolution, along with payment, if applicable. Again, please take into consideration the length of time for processing corporate license applications.

Some may be pressed to plan for succession beforehand, due to either medical ailments or personal reasons. It’s important to note that if you operate under a corporate license, it may be a smoother transition to have additional broker-officers already licensed to your corporation under Business & Professions Code 10158. Additional broker-officers become licensed by filling out a Corporation License Application (RE 201) and submitting it, along with payment, to DRE headquarters in Sacramento for processing.

This may be smoother in the event time is not on your side. Please note, however, that this does not mean there will be shorter processing times. It simply means someone could step in after submitting a corporate license application to substitute as the designated officer until a permanent designated officer is recruited and whose own corporate license application is submitted and processed.

Under less pleasant circumstances, such as an untimely incapacitation of a designated officer, having an additional broker-officer or another qualified broker may also allow for the corporation to continue operations without interruption, provided the department receives a corporate license application by the new designated officer within ten (10) business days from incapacitation or death.

In all employment and affiliation changes, it is also equally important to comply with Commissioner’s Regulation 2726, which requires a broker-salesperson relationship agreement to be dated and signed by all parties—salesperson or broker associate who is retained as a salesperson, and their responsible broker. The agreement must cover all material aspects of the relationship, including but not limited to, supervision of licensed activities, duties, and compensation.

Additional considerations may include the fling of any fictitious business name statements or business licenses as may be required in various municipalities. Seek guidance from the appropriate city or county governmental agencies with jurisdiction in your area who oversee these requirements.

In the case of adding or deleting the use of any fictitious business names, keep in mind the requirement to submit the appropriate change form to accomplish these tasks, as well as the adding or deleting of any main office or branch office addresses. The broker or officer may use eLicensing to add or cancel a branch office location associated with the broker license.

Proper planning can make all the difference between a successful succession and a difficult one. Always seek guidance from your legal counsel, tax consultant, financial planner, and other professionals as applicable.



Disclaimer: The above information is intended for information purposes alone and is not intended as legal advice. Please consult with counsel before taking any steps in reliance on any of the information contained herein.