If I form a team with another agent, will I need a firm license?

QUESTION: My name is John Smith and I am affiliated with ABC Realty. For the last year, I have employed an assistant to handle various administrative matters. My advertising refers to “John Smith Team at ABC Realty.” Up to now, I have not created a legal entity to receive compensation from ABC’s broker-in-charge. If I add another agent to my team, will I be required to obtain a firm license?

ANSWER: Not necessarily. In 2016, the Real Estate Commission published materials for the General Update class that are still available on the Commission’s website. They can be accessed here.

The Commission’s materials lay out three possible scenarios for forming a team. Those materials confirm that not all teams need to have a firm license. Instead, a team’s organizational structure and its advertising will determine what it must do to comply with the License Law and the Commission’s rules.

One possible, and perfectly legal, scenario is for you and one or more agents from your firm to agree to work together but without forming a separate legal entity. The compensation each agent will earn can be set forth in your agreement, and there is no requirement that the compensation paid to each agent be equal. Under this scenario, as long as you do not create a separate legal entity, no separate firm license would be required. Instead, all of the agents on your team would have only one official affiliation, namely with ABC Realty. ABC Realty would have to be shown on all agency agreements and ABC’s broker-in-charge would be responsible for the activities of you and the other team members.

There is one caveat: in order to be compliant with the Commission’s advertising rule, all of your team’s advertising, including signs and business cards, must include the name ABC Realty, since that is the firm with which you and your team members are affiliated. If you and your team members advertise your services as the “John Smith Team at ABC Realty,” you will all be in compliance.