Our experts will guide you in your choice of domicile.
Our experts will guide you in your choice of domicile.
When you buy a property, you can do so either in your own name, or by creating an SCI. In your own name, you buy the property alone, in your own name. You are therefore thesole owner of the property.
In contrast, the SCI is a non-trading property company that allows you tobuy and manage a property as a group. You and your partners are the owners of the property.
By investing in your own name, you acquire a property in your own name. This means that you use your own funds to purchase the property. As a result, you sign over the property in your own name, as an individual.
The purchaser's name then appears on all deeds relating to ownership of the property. You are therefore the sole owner of the property, and you receive the rent directly if the property is rented out.
If you want to buy a property in your own name, it's possible! For example, with your spouse, your children, your friends... Be aware, however, that you will be subject to joint ownership: your name and those of your co-purchasers will appear separately on the title deed to the property. But what is joint ownership? This system allows each owner of a property, when there is more than one, to have equal rights over it. It is frequently used following a death, in the case of an inheritance shared between several children.
As a general rule, joint ownership of a property is most commonly achieved through the indivision system. This system automatically applies in the case of an estate with several heirs.
Unlike SCI, indivision is not a legal entity.
A société civile immobilière (SCI), on the other hand, is a legal entity separate from you as an individual. As a result, it is this legal entity thatwill own the property.
Composed of a minimum of 2 partners, there are several types of SCI, including :
Note: Setting up an SCI involves drawing up articles of association to govern its operation.
Setting up a non-trading property company (SCI) enables several people to build up and manage an estate, with each person having the status of partner. As a partner, you hold shares in the company in proportion to your stake in the share capital . share capital.
Like all other companies, the most important decisions have to be taken collectively.
In addition, SCI partners appoint a manager for the day-to-day management of the property, particularly in the case of rentals.
Whether your property is purchased through a SCI or in your own name, each system has its own advantages. It is therefore essential to understand the legal consequences of each system, so that you can make the most appropriate choice for your project.
Buying a property in your own name offers many advantages:
Investing alone in your real estate project: investing in your own name is particularly suitable for people wishing to buy a property alone;
Simplicity of formalities: the formalities involved in buying a property in your own name are quick and straightforward: there's no need to set up a company, all you have to do is sign the deed of sale at the notary's office;
Possibility of offering the property as a furnished rental : if you choose to rent out your property as a furnished rental, you can benefit from the status of non-professional furnished rental (LMNP) and thus deduct a flat-rate allowance of up to 30% of rents (micro-BIC regime), up to a maximum income of 15,000 euros;
Flexibility in the management of the property: the owner alone decides on the management of the property;
Lease terms: the minimum lease term is set at 3 years for unfurnished rentals;
Applying a holding period allowance: buying a property in your own name is particularly attractive if you plan to hold it for a long time. When you resell the property, a holding period allowance is applied to calculate the taxable capital gain, based on the length of time the property has been held. The longer you hold the property, the greater the allowance.
Buying a property with an SCI also offers many advantages :
Joint property management : setting up an SCI allows you to buy a property as a group, pooling your resources (in the event of work being carried out, the cost is borne by all the partners, in proportion to the shares they hold) and sharing the risk between the partners, without being subject to joint ownership;
Making it easier to obtain a mortgage: buying property through an SCI with several partners is particularly popular with banks, which are more likely to grant a mortgage to finance your project;
Protecting partners' personal assets: as an SCI is a legal entity, it has its own assets: partners' personal assets are therefore protected, and debts and profits on the property held are shared between the partners;
Make it easier to pass on your estate to your heirs : setting up an SCI makes it easier to pass on your property to your children, since it's not the property that is passed on but the shares you own;
Avoiding joint ownership: unlike a purchase in your own name, an SCI is strongly recommended to avoid joint ownership rules, which often lead to conflicts between the joint owners and a forced sale of the property;
Benefit from a tax allowance on the donation of shares: the donation of shares in a non-trading property company (SCI) allows you to benefit from a tax allowance, linked to the degree of kinship between the partner and the beneficiary;
Avoiding transfer duties: the SCI allows you to avoid the transfer duties usually payable on inheritance;
Choosing the applicable tax regime : with an SCI, you can choose between income tax (IR) and corporation tax (IS):
Income tax (impôt sur le revenu - IR): by opting for income tax, the partners declare and pay tax on the company's profits: each partner must declare, at the time of his tax return, the share of profits corresponding to the shares he holds in the SCI ;
Corporate income tax (IS): by opting for IS, the company pays tax on its profits: shareholders are only taxable if they receive dividends.
However, there are a number of disadvantages to both schemes, and it's essential to take these into account when choosing the most appropriate one for your project.
Buying a property in your own name can have a few disadvantages:
Financial risks: if you buy a property in your own name, your personal assets are unprotected, easily seizable and you may be held liable in the event of financial difficulties;
Maintenance and repair costs : if you manage a property on your own, you'll have to deal with maintenance and repair costs, which can be unexpected and substantial;
Joint ownership: the management of a joint-ownership purchase is much more restrictive, particularly in the event of a dispute between the owners of the property (for example, in the event of divorce or disagreement), in the event of the death of one of the owners, but also in the event of the departure of a member of the joint ownership (the other owners will either have to buy the share of the departing member or sell the property);
Non-deductible depreciation: the depreciation of a property in your own name is not deductible, unlike when you hold a property in a non-trading company (SCI);
Difficulty of decision-making: decisions must be made in agreement with each owner (undivided), given that each holds a share in the property;
It 's harder to get a mortgage: if you buy the property on your own, you'll need to provide sufficient guarantees to obtain a mortgage from the banks, whereas if there are several buyers in an SCI, your debt capacity will be lower.
Investing in real estate by creating an SCI can also have some disadvantages:
Ownership of the property by the SCI: when you set up an SCI, you are not the direct owner of your property, which is owned by the SCI;
Complexities involved in setting up an SCI: creating an SCI involves a number of steps, often cumbersome and time-consuming for property buyers: registering the SCI, drafting the articles of association, setting up and depositing the capital with a bank, drafting and publishing a legal announcement, etc.
Impossibility of creating and managing an SCI alone: the law does not allow the creation of an SCI alone. A minimum of 2 partners is required to create and manage an SCI;
Complexity of management and accounting: managing an SCI can be complex, particularly in terms of the administrative, tax and accounting obligations to be met: holding an Ordinary General Meeting (AGM) at least once a year, drawing up AGM minutes, rigorous bookkeeping, VAT declarations, income tax returns, etc. ...;
High costs : a non-trading property company (SCI) requires the payment of a number of not inconsiderable costs, from the moment it is set up and throughout its existence. For example, you'll need to consider the costs of registering an SCI and the costs of legal announcements. Other expenses may also be incurred if you decide to delegate certain tasks to an expert or a professional, such as the drafting of your articles of association by a legal professional, the management of your accounts by a chartered accountant, or the cost of domiciliation of your SCI by a domiciliation expert (such as SeDomicilier). However, it's not compulsory to use a chartered accountant to manage your SCI, although it's strongly recommended if you (or your partners) have no idea about accounting.
The choice of whether to invest in your own name or in a non-trading property company (SCI) depends essentially on the specifics of your real estate project. To make the best choice between acquiring your property in your own name or through an SCI, you need to take a number of criteria into account:
The SCI allows you to invest in a property with a view to letting it out. However, as the property is owned by the company, the lease is signed in its name, and it is the SCI that collects the rents and deducts the rental charges.
Conversely, buying in your own name also gives you the option of renting out the property. You will receive the rental income directly, but itwill be subject to income tax.
So if you want to rent out your property, these two options allow you to do so.
Depending on the nature of your project and your budget, you can buy the property alone or with others. Buying a property with several people can reduce the associated costs (purchase price of the property, agency commission, notary fees, etc.).
However, you should be aware that if you choose to set up an SCI, you'll need to set aside a larger budget, including the costs associated with the formalities involved in creating the SCI (registration fees and the cost of publishing a legal announcement), and possibly ancillary expenses (hiring an expert to draw up your articles of association or manage your accounts).
That's why it's important to draw up a provisional budget before you buy your home.
It's possible to buy your property in order to pass it on to your heirs.
When it comes to transferring assets, the SCI is more advantageous: it facilitates the transfer of your assets by avoiding the joint ownership system. Instead of passing on the property, your shares are passed on to your heirs. This technique ensures a smoother succession, avoiding disputes between buyers and the forced sale of the property.
Before making your choice, don't forget to ask yourself this question: do I prefer to transfer my property under an SCI or under the undivided ownership system?
The SCI allows you to choose between income tax (IR) or corporation tax (IS), whereas buying in your own name leaves you no choice: you are subject to income tax (IR).
When you set up an SCI, you can choose your tax regime according to your tax situation and that of your partners:
Income tax (IR): associates are personally liable for income tax, and must complete the property income section of their annual income tax return: each associate is then taxed on his or her share of income;
Corporation tax (IS): the company is liable for corporation tax (IS), and shareholders are taxed only on the dividends distributed to them. It is possible to benefit from a reduced rate of 15%, if you do not exceed a certain sales threshold.
The SCI allows you to opt for either income tax (IR) or corporation tax (IS), depending on the personal situation of the partners and what you consider to be the most advantageous from a tax point of view.
It is perfectly possible to set up an SCI once the property has been purchased in your own name. Simply create an SCI and transfer the property to the newly-created company.
However, this operation must be carried out by a notary, as it is considered a transfer.
Do you have a real estate project in mind but still don't know which status to choose? As you can see, the choice between SCI and sole proprietorship depends mainly on the nature of your project and the criteria mentioned above.
