RISMEDIA, June 23, 2008-As a real estate agent, you have plenty of experience dealing with the legalities associated with real estate transactions. When you begin assembling your agent team, however, you have additional legal considerations that you probably never have needed to deal with before, including those related to incorporating, fair hiring practices, and intellectual property rights.
In Chapter 7 of RISMedia’s recently released book, “Power Teams: The Complete Guide to Building and Managing a Winning Real Estate Agent Team,” by RISMedia President and CEO John Featherston and top producing Broker Ralph R. Roberts, we introduce you to some of the legal issues you need to consider, so you can develop the foresight to avoid the most common pitfalls. Following is an excerpt from Chapter 7:
Understanding the Legalities That Govern Your Team
Your agent team may be subject to an assortment of laws and legal hoops you have to jump through in order to protect your business assets and your team from litigation. Although specific laws vary by state, county, and city or town, the laws generally fall into the following categories:
• Corporate structure: The first legal decision you will need to make is how to structure your business-as a sole proprietorship, S corporation, LLC, C corporation, partnership, or limited partnership.
• Finances: Certain laws are intended to apply to the financial aspect of your business, including the way profits or shares of the business are divided. Laws will vary greatly depending on how your business is structured. If, for example, you are working as a husband-and-wife team, the laws that apply to you will differ from those that apply to two equal partners or to a group of agents who are sharing in the business. Consult your attorney and accountant for details.
• Taxes: For many teams, taxes are the biggest challenge. Because state and local tax laws vary and all tax laws are subject to change, we cannot offer much specific guidance in this area, but we can offer some general advice: Keep good records and make sure you track commissions for every agent separately. We cover the nuances of tax laws and working with an accountant in Chapter 8.
• Labor: If you become an employer, you will be subject to labor laws. Refer to the section “Being an Equal Opportunity Employer,” later in this chapter, for details.
• Vendors: Relationships with vendors are typically based on contractual agreements. You and your vendor will be bound by the terms of your arrangement.
• Referrals: Depending on where you do business, you may or may not be able to charge a fee when you refer a client to a particular individual or company. If you are able to charge referral fees and decide to do so, having a contract in place that stipulates the conditions of the agreement is always a good idea.
• Intellectual property: You need to focus on two areas here-protecting what you are developing as a team and honoring the rights of other individual agents and teams.
Anyone with $100 and a chip on their shoulder can file a lawsuit, so you can never be completely immune to being sued. You can, however, reduce your exposure to lawsuits and other legal action through careful planning and preparation. In the following sections, we explore several strategies that can help you minimize the risk of owning and operating your own agent team.
Note: Defending yourself against a lawsuit can be time-consuming, stressful, and costly. It can also open you up to personal liability. Don’t wait for a lawsuit to strike. Be proactive in building your business in such a way that lawsuits are less likely and you are better able to defend yourself when the unavoidable lawsuit comes your way.