REM – Buying a partial interest in a brokerage

If you are buying into the real estate brokerage that employs you and in effect forming a partnership of some sort, many questions must be answered. Consider the ramifications of acquiring a partial interest only, which could be either a majority or minority ownership position.

A majority interest is the holding of 50 per cent plus one of all issued shares of an incorporated company. A minority is less than this. At law, there is no such thing as an equal interest. If exactly 50 per cent of the issued shares are owned by any party, this is a minority position.

In smaller companies such as most real estate brokerages, control is usually obtained by owning more shares that anyone else or all other shareholders combined. A minority interest holder may have a small voice, a growth investment and perhaps a job with slightly more security than otherwise; but legally, little else. The person who holds the majority interest, special covenants excepted, controls the brokerage. With certain exceptions, that individual can make all of the decisions and run the firm as he sees fit. Although there are some legal protections in the day-to-day operation, minority shareholders are at the mercy of the majority shareholder.

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