Free practice questions · Course 5
Setting Up Your Real Estate Business Practice Questions
Legal structures, brokerage selection, and the administrative setup of a new practice. Below are 5 free sample questions from our 10-question Setting Up Your Real Estate Business bank. Each comes with the correct answer and a full explanation.
Question 1 of 5
When did Personal Real Estate Corporations (PRECs) become available to Ontario salespersons and brokers?
- AApril 2023, alongside TRESA Phase 2
- BOctober 2020
- CJanuary 2002, with the original REBBA
- DPRECs are not available in Ontario
Why B is correct
PRECs let registrants incorporate and receive commissions through the corporation rather than personally. The benefit is access to the small-business tax rate. Most accountants suggest the math starts to work once net business income clears roughly $100,000 per year, but the exact break-even depends on personal spending needs and other income. New registrants should not incorporate by reflex in their first year.
Question 2 of 5
Under TRESA, who is the contracting party on every real estate listing agreement and Agreement of Purchase and Sale?
- AThe salesperson
- BThe broker of record
- CThe brokerage
- DThe salesperson's PREC
Why C is correct
This is one of the most fundamental rules in Ontario real estate. Salespersons cannot trade independently. The brokerage holds the contracts, holds the trust account, and is responsible to the parties under those contracts. New registrants often misunderstand this because the salesperson does the work, but the legal structure has the brokerage at the centre of every transaction.
Question 3 of 5
Which of the following is NOT a typical responsibility of a salesperson operating as an independent contractor?
- APaying their own marketing and vehicle expenses
- BRemitting their own income tax to the CRA
- CMaintaining and remitting trust account funds for client deposits
- DTracking their own business expenses for tax deductions
Why C is correct
Trust accounting is one of the brokerage-level responsibilities under TRESA. Client deposit money never sits in a salesperson's personal or business account. RECO inspects brokerage trust accounts as part of regulatory oversight. Confusing this is one of the most common new-registrant mistakes.
Question 4 of 5
A salesperson wants to switch brokerages. What must happen with their RECO registration?
- ANothing. The registration follows the registrant automatically.
- BThe registrant must surrender their registration and reapply from scratch.
- CThe registration must be transferred from the old brokerage to the new one through RECO.
- DThe registrant may hold registration with both brokerages simultaneously while transitioning.
Why C is correct
Brokerage selection is one of the most important early decisions because of how this transfer process works. While transfers are administrative rather than punitive, they are not instant and they can interrupt commission processing on transactions that straddle the change. New registrants should choose carefully on the first move and avoid hopping between brokerages in their first year.
Question 5 of 5
Which of the following items would be considered the highest priority for a salesperson to set up BEFORE their first transaction?
- AA custom-designed logo and personal brand book
- BA separate business bank account and signed independent contractor agreement with the brokerage
- CA leased luxury vehicle marketed as a brand asset
- DA paid social media advertising campaign across three platforms
Why B is correct
New registrants often overspend on visible brand items (cars, signage, photo shoots) and underspend on the boring infrastructure that protects them at tax time and during commission disputes. A clear contractor agreement and a separate business account are the two non-negotiables. Everything else can be improved over time without putting the registrant or their first transactions at risk.
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