In 2005, almost 6,500 civil societies have been established in Paris. The real estate companies (SCI) became a common mode of wealth management: they can hold several real estate and manage flexibly. But beware, they are not suitable to all situations. SCI (1), real estate company, is a company comprised of two partners at a minimum, which aims to manage a property portfolio. By creating an SCI, each partner receives shares in return for his contribution. SCI can not have a commercial purpose: you can not buy goods to resell immediately for profit. As such, an SCI can "rent furnished" as the benefits of apartment rentals are regarded as business profits tax. To be a
SCI, there is no criterion of social capital minimum. Nevertheless, the issue of share capital must be asked: low or high, the amount varies depending on specific situations and goals.
To create an SCI, it simply:
- write the articles by private deed or by deed, then the sign
- register the statutes of the SCI to the tax
- publish the constitution society in a legal gazette
- make the registration of the company.
Benefits SCI
It is customary to say that buying a property under the SCI allows more flexible management of heritage in ownership. This is mitigated by changing the legal regime of joint ownership, in effect since January 1, 2007; unanimous undivided no longer routinely required (2). In SCI, freedom of contract can adapt the articles for the intended purpose. The SCI is particularly well suited when many people decide to buy a whole property to rent.
An SCI can be created to protect a spouse upon death. The articles may contain terms favorable to the survivor, to guarantee him the enjoyment of the family property until his own death. This option retains its interest, even if the surviving spouse, since a recent reform, a life interest in the family home, unless otherwise agreed by the deceased.
The SCI is also interesting in regard to transmission of property assets. Parents may, for example, send a free portion of their shares during their lifetimes (in the limit of 50,000 euros per parent per child every 6 years). They can also reduce the amount of inheritance tax to pay for their children their death. How? By dismembering the shares of the SCI. Thus, a property can be "dismembered" (3) or split into two entities: on one hand the "bare ownership" and the other the "usufruct". Parents give the bare ownership of their shares to their children and retain the usufruct. Children will pay so that donations of human on the bare ownership. The bare property tax value will be determined by age of donor (parental age at the time of donation). Upon the death of parents, usufruct off and the children become full owners without formality or fees.
Disadvantages of SCI
SCI involves a cumbersome management for individuals: we must respect legal obligations, accounting and tax like any company.
Another disadvantage of the SCI: the partners are jointly liable for partnership debts in proportion to their contribution. For example, if an SCI decides to hire the work done by a big company it can not afford to pay, the company can turn against each partner indefinitely until their share of debt is mopped.
In case of purchase of the residence through the SCI, it should be noted that the shareholders can not use their PEL, and may not use the zero-interest loans and other loans contracted. SCI will not benefit from tax cuts for big jobs.
Do not forget that the shares of an SCI are more difficult to sell a home or a building ...
(1) Is addressed in this article that the SCI wealth management, including object is the leasing or managing one or more buildings. There are other forms of SCI, the different legal regime, such as allocating or SCI-building sale.
(2) Acts of Conservation (acts designed to evade the undivided property to an imminent and that does not compromise the rights of other joint) can be performed by a single undivided. Some actions require a two thirds majority. The sale of the building requires it, the agreement of all members of the ownership.
(3) For a definition of these terms, see our fact sheet:
http://www.fnaim.fr/infos/guide-immobilier/usufruit/demembrement.aspx
Fiscal transparency?
The SCI is, by default, except for tax transparent option for the corporate tax. Tax transparency means that each partner is taxed on profits made by SCI in proportion to its shareholding in the company. The benefits of SCI therefore appear on the statement of income for shareholders as property income.
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