Below are some questions that the Legal Helpdesk received recently regarding agent compensation. If you have a question about our legal forms, license law, or basic real estate law, submit it to the Legal Helpdesk by clicking here.

Q1: I would like to streamline the closing process for myself and my agents. Can I ask the title company to distribute commission checks to my agents directly so that they get paid sooner?

A1: No. Alabama license law § 34-27-36(a)(15) prohibits salespeople and associate brokers from receiving payments related to a real estate transaction from anyone other than their qualifying broker.

Q2: I am a salesperson and would like to receive my commission payments to an LLC that I own/control. Is that allowed? Does the LLC have to have a real estate license?

A2: Yes, that is allowed and no, an LLC created for the purpose of receiving commission payments is not required to hold a real estate license. Although Alabama license law requires that any person or company receiving compensation related to a real estate transaction be licensed, there is an exception for LLCs that are set up exclusively for the purpose of receiving compensation on behalf of a real estate licensee. It is important to note that if the LLC is not licensed, its only permissible function is to receive compensation for the licensee.

Q3: If I create an LLC to receive my compensation, does it have to be registered with the Alabama Secretary of State?

A3: Alabama license law does not require that an LLC receiving compensation for a licensee be filed/registered in Alabama specifically. However, the LLC must be properly created under the laws of the state in which it is registered and must otherwise comply with all applicable laws. The best practice is to seek the assistance of a business attorney and/or tax professional to ensure that your LLC is set up properly.