Independent Contractor vs Employee
Definition
In real estate, the distinction between an independent contractor and an employee determines tax treatment, liability, and the level of control a broker may exercise over the agent's daily activities. Most real estate agents operate as independent contractors.
Example
Broker Johnson has a written independent contractor agreement with Agent Lee stating that Lee's compensation is 100% commission-based. Johnson can require Lee to follow fair housing laws and use approved contracts but cannot mandate that Lee work specific office hours.
Exam Tip
The exam tests the three IRS requirements for independent contractor status—know them precisely: licensed agent, commission-based pay, and a written agreement. Remember that a broker controls what must be done (legal compliance) but not how the agent does it.
Related Practice Terms
Escrow Account Management
Brokers in Florida have strict responsibilities for managing escrow accounts, including monthly reconciliation and proper handling of trust funds.
Record Keeping Requirements
Florida brokers are required to maintain transaction records and escrow records for a minimum of five years.
Commingling and Conversion
Commingling is the illegal act of mixing client trust funds with a broker's personal or business operating funds; conversion is the misappropriation of those funds.
License Renewal Requirements
Florida real estate licenses must be renewed biennially, and sales associates have specific post-license education requirements for their first renewal.
FREC Disciplinary Authority
FREC has the authority to impose fines and other disciplinary actions on licensees who violate real estate laws and rules.
License Requirements
License requirements are the mandatory qualifications—including pre-licensing education, examination, and background checks—that a person must satisfy before legally practicing real estate. These requirements are established and enforced by each state's real estate commission.
Frequently Asked Questions
Test Your Practice Knowledge
Practice with exam-style questions to make sure you can apply Independent Contractor vs Employee and other practice concepts.