Leasing License Practice Exam

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What is a key component that must be included in the employment agreement between a sponsoring broker and a licensee?

Commission rate
Type of compensation
Trial period conditions
Sales goals

The correct answer is: Type of compensation

The type of compensation is a fundamental aspect of the employment agreement between a sponsoring broker and a licensee. This component delineates how the licensee will be compensated for their services, encompassing various forms such as commission splits, salary, bonuses, or any combination thereof. Defining the type of compensation clearly is essential because it sets expectations for both parties, ensuring that the licensee understands how their earnings will be structured based on performance and contributions to the brokerage. While commission rate might seem like a specific topic related to earnings, it is actually a narrower subset of the broader type of compensation. Additionally, trial period conditions and sales goals pertain more to performance metrics or expectations rather than the essential financial arrangements covered under compensation. Hence, focusing on the overall type of compensation captures all potential arrangements and ensures clarity in the agreement.