Establishing Your New Brokerage
May 3, 2019 |
Obtaining a broker’s license is an accomplishment in and of itself. Setting up your brokerage is the next logical step for real estate entrepreneurs. This business enterprise requires careful planning and preparation. There are many considerations beyond your brokerage name and location. Below are some items to consider when designing your brokerage business plan.
The Brokerage’s Name
The Superintendent has exclusive authority to approve the name of your new brokerage. Primarily it cannot be misleading. Initially, you should file a Name Approval Application with the Division. This application is necessary to obtain approval to use your desired name. Once approved, you must register the name with the Ohio Secretary of State’s office. This process allows you to incorporate your business entity and/or register any trade names you will use for your practice. The applications can be completed and submitted online.
Once your name has been approved and entity created, you will apply to have your brokerage officially licensed as a brokerage. The forms are available online at the Division’s website and vary depending on the type of corporate entity you created. If you have any other business owners or officers that are not licensed as a broker, each will have to sign an affidavit attesting that they will not act as a broker for the brokerage. You will have to open a trust or special account and obtain a letter from the bank that includes the account name, account number and a statement that the account is a trust or special non-interest bearing account. Last, you must propose an actual place of business in Ohio.
Forms and Contracts
You should consider developing or work with legal counsel to develop, independent contractor agreements for your agents. This is not required, but is a good business practice. These agreements identify the scope of your agent’s duties, their compensation structure and other brokerage minimum requirements such as insurance and professional memberships. You should also identify the transactional forms your brokerage will use. These forms can be available through professional organizations or developed privately. Some include listing contracts, buyer agency agreements, purchase agreements, the company policy, the consumer guide to agency relationships, the lead-based paint form, and residential property disclosure form.
You will want to develop policies and procedures to assure your brokerage operates in a manner that is compliant with the law. Considerations are the handling of trust funds, the payment of commissions and referral fees, the maintenance of transactional records, the maintenance of client confidential information and the fulfillment of fiduciary duties to clients.
If you practice will include the management of property, you may need to establish a separate property management trust account. If the brokerage will not hold rents and security deposits, then the account can be maintained by the owner. Additional care will need to be taken to assure agents are competent to manage property. Last you will need to develop procedures to assure un-licensed assistants, who are limited in what they can do on behalf of clients, do not engage in any activity requiring licensure.
With careful planning and preparation, you can be sure that your new business enterprise is successful, both financially and legally. Additional information about the establishment of a brokerage can be found online at New Brokerage Guide.