It’s a fact of enterprise that certain business models deal with more complex payroll situations than others. Real estate agents and agencies are a prime example. In this day and age, more and more entrepreneurs are getting into real estate, thanks to the recent housing boom. But if you’re not aware of the particular ways that realtors and real estate agents get paid (or expect to be paid), payroll can be a nightmare. Luckily, here at 4Corner, we are dedicated to finding financial solutions for companies of all sizes and types, and we can help you ensure that the payroll service you choose for your real estate business will serve your needs.
Related: Bookkeeping for Real Estate Agents
Here is some payroll advice to consider as a real estate agent.
If you are working as a sole proprietor, or if you’re just getting started in the real estate business, odds are good that you will need to file as a sole proprietor, which means that your tax options, and your options for paying yourself, are limited. But once you hit the $40,000 mark in terms of yearly income, you can file for incorporation as an S-Corp. Once you become an S-corporation, you’ll need to put yourself on payroll. Essentially, there’s not much difference between getting paid as an independent contractor and getting paid as an employee of your own S-Corp, except that your net pay will be taxed more effectively. If you choose to incorporate as an S-Corp, you’ll only have to pay taxes annually, and you’ll avoid having your income taxed twice. Bear in mind that you’ll need less than 100 stakeholders to register as an S-Corp. 4Corner can help you and your stakeholders decide which business entity is best for your company, which in turn will affect your payroll solutions.
Read more: Selecting the Best Business Entity for Real Estate Agents
As is the case for workers in many other industries, real estate agents often are paid only in commissions from a sale. Although there are rare cases where a real estate agency, or other related business like Redfin, might pay their agents on salary rather than by commission. In either case, if you are in a position to employ other real estate agents, you’ll need to set up a payroll solution that fits your company’s needs. There are certain software options that are better suited for commission-based payouts than standard payroll software options like Quickbooks. If your agents are paid out on commission only, we recommend payroll software designed to handle the intricacies of commission only structure, like Performio, Blitz, or Spiff. The best way to decide which payroll solution is the best for your particular real estate agency is to consult with a professional, like our financial advisors at 4Corner, who can make recommendations to you based on your specific commission needs.
Although real estate agents get paid on commission, there are often several agents who split each commission, and don’t forget about the fee the broker takes on top of that. All this complex math can leave room for common payroll mistakes that you’ll want to avoid when you start filing your real estate agency’s payroll regularly. It is important to keep good records throughout the payroll process—often a task made more simple by a good payroll software. Sometimes employers will misclassify their employees—a tricky situation with regard to real estate in particular, given that realtors are sometimes hired on as independent contractors and sometimes hired on in a salaried capacity. Other common payroll mistakes involve inadequate compensation reporting or missing federal reporting deadlines. At 4Corner, we can help you ensure that your real estate business is well-equipped to handle your specific payroll needs.
Managing payroll for real estate agents and agencies can be difficult, especially if you don’t have a team of financial advisors and accountants on your side. At 4Corner, we can help you set up payroll services for your real estate agency, make sure that you know all of your filing options come tax season, and advise you through the growth of your agency over time.
Schedule a free consultation with us today for payroll help in real estate, or in any industry.
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