In a previous post, we examined 10
steps to starting a business.
In this post, we will be focusing on 5 additional steps that are necessary to
the starting of a real estate business.
The information contained in this
article is intended for general reference only. In any instance where there is
a discrepancy between this article and the language in the Act or Rules, the Act or Rules govern.
The real estate business in Illinois
is regulated by the Illinois Department of Financial and
Professional Regulation (IDFPR) and a license is required to
engage in what the Department defines as licensed activities.
Step 1 – Determine the type or types
of licenses required
A person needs a real estate license
if they provide assistance which is in any way intended to result in the sale
or lease of real estate. The definition of the word “broker” under the Act provides 11 examples of
the type of assistance that require a real estate license.
In general, a license is required
when the assistance is provided for another and for compensation.
IDFPR issues three kinds of “business entity”
licenses: real estate broker corporation, partnership licenses and limited
liability company licenses. Note that the business must be
properly registered with the Illinois Secretary of State
before an application for licensing is filed with the IDFPR. The procedures for filing an application
for business entity licenses are found in Section 5-15 of the Act and in 1450.140 of the Rule.
Management: Any officer of a
broker corporation, manager of a limited liability company, and general partner
of a partnership, who are involved in any way with the brokerage activities of
the business, must have a broker or managing broker license.
A managing broker may also operate a
real estate business as a sole proprietor. A sole proprietor business does not
require a license from the IDFPR. However, a sole
proprietor broker must maintain an “office” and must comply with all other
applicable provisions of the Act and Rules.
The main office and any branch
offices of a corporation, partnership or LLC, must be licensed.
The main office of a sole proprietor
does not need a license, but any branch office must be licensed.
Step 2 – Determine or Appoint a
· Every real estate office must have a managing broker of
· The managing broker does not need to be an owner of
· The managing broker is responsible for the supervision of
all licensed activities performed by the office.
Step 3 – Prepare the Contracts and
Agreements Required for the Operation of the Business
· If corporation, LLC or partnership, required employment
· If corporation, LLC or partnership, written policy
· Required written disclosures and legal forms
Step 4 – Office Set Up
· Every brokerage business must have an office, or place of
· The license of every sponsored licensee must be available in
· Each office must have a “sign”.
· The sign must include the name of the sponsoring broker.
· Registration for an assumed business name is required any
time that a real estate business is marketed to the public under a name that is
IN ANY WAY different than the name appearing on the sponsoring brokers license.
· The sign must be outside the office and must be of a size
and nature that will be reasonably readable by the public. (A listing on a
building directory meets this requirement)
· Consumers and clients must be welcome in the office.
· The managing broker must maintain all required records at
the office. See Rule 1450.755 for recordkeeping requirements.
· Other businesses may be operated out of the same office
location. However, the real estate business must be physically separated from
the other businesses.
· Establish escrow account if the brokerage firm will hold
earnest money or other monies belonging to others.
Step 5 – Open the Office.
· Implement Business and Marketing Plan
· Hire and Train Employees
· Operate in an ethical and legal manner