New Jersey Realtors are now permitted to form Limited Liability Companies (LLCs) for the purpose of accepting real estate brokerage commissions. The new law, effective February 2025, gives specific permission for a salesperson or broker salesperson (an “Agent”) to operate through an LLC. One of the driving forces behind this law was to eliminate confusion as to whether Agents may take advantage of the pass-through business income deduction.

Simply put, the new law and its implementing regulation, as promulgated by the New Jersey Real Estate Commission (REC), allows an Agent to accept payment of a real estate brokerage commission or other valuable consideration from an LLC. It also permits an Agent to form and LLC for the purpose of receiving a commission or other valuable consideration.

The new law and its implementing regulation also clarifies that an Agent who is compensated entirely on a commission basis is not an employee for the purpose of State unemployment compensation law, and other applicable labor laws. Other highlights include:

• An outline of requirements for entity registration.

• The requirement that the Agent seeking registration of an entity must be a member, partner, shareholder, or otherwise have ownership interest in the entity.

• The clarification that an entity formed pursuant to the new law may not be registered by more than one Agent.

Of course, Agents operating through an LLC must also remain mindful of all laws, regulations, and ethical standards that govern real estate transactions such as those addressing the duty to ensure transparency in commission payments. Therefore, Agents that choose to take advantage of the new law should provide clear and complete explanations to their clients of how and why the commissions are being routed through LLCs.

(This blog, prepared by Campanella Law Office, is for general informational purposes only and is not intended to convey specific legal advice, nor is it intended to create or constitute an attorney-client relationship.)