Our experts will guide you in your choice of domicile.
Our experts will guide you in your choice of domicile.
When buying 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 name. You are therefore the sole owner of this property.
On the other hand, a SCI (property holding company) is a real estate company that allows you to buy and manage a property with others. So, you and your partners are the owners of this property.
When you invest in your own name, you are acquiring real estate in your name. This means you're using your own funds to buy the property. Consequently, you sign for the property in your name, as an individual.
The purchaser's name then appears on all documents relating to the ownership of the property. You are therefore the sole owner of this property and you directly receive the rent if the property is leased.
If you want to buy property together under your own names, that's totally doable! Like with your partner, kids, friends... Just so you know, you'll be under the joint ownership (indivision) system: your name and the names of your co-owners will be clearly listed on the property title. But what's joint ownership? It's a system where each owner has equal rights to the property. It's often used after someone passes away, when an inheritance is shared between several children.
Generally speaking, owning a property with several people is more commonly done through joint ownership. This system applies automatically in the case of a succession with several heirs.
Unlike the SCI, joint ownership does not constitute a legal entity.
Conversely, a property holding company (SCI) is a separate entity from you, as an individual, and has legal personality. As a result, this legal entity will own the property.
Made up of at least 2 partners, there are several types of SCI, including:
Note: Creating an SCI means drafting articles of association that govern how it operates.
Creating an SCI allows you to build and manage assets together, with each person having the status of a partner. As a partner in this company, you hold shares proportional to your participation in the share capital.
Like all other companies, the most important decisions must be made collectively.
Also, the partners in a SCI appoint a manager for the day-to-day management of the property, especially if it's being rented out.
Whether the property is purchased through an SCI or in your own name, each option has its own advantages. It's essential to understand the legal consequences of each to make the best choice for your project.
Buying real estate in your own name offers many advantages:
Investing alone in your real estate project: investing in your own name is more suitable for people who want to buy a property on their own;
Simple formalities: The formalities for buying a property in your own name are quick and simple: you don't need to create a company, all you need is a signature on the deed of sale at the notary's office.
Possibility of offering the property as furnished rental: if you choose to rent your property as furnished rental, you can benefit from the status of non-professional furnished rental (LMNP) and thus deduct a flat-rate allowance of 30% of the rents (micro-BIC scheme), up to a limit of 15,000 euros of income;
Flexibility in property management: the owner decides alone how to manage the property;
Lease commitment period: the minimum lease term is set at 3 years for unfurnished rentals;
Application of an allowance for the period of ownership: buying a property in your own name is particularly attractive if you plan to keep it for a long period. When you resell the property, an allowance for the period of ownership is applied to the calculation of the taxable capital gain, depending on how long you have owned the property. The longer you keep the property, the greater the allowance will be.
Buying real estate through an SCI (Société Civile Immobilière - property company) also offers many advantages:
Managing real estate assets with multiple people: creating an SCI allows you to buy a property with several people, pooling your resources (in the event of work, the cost is borne by all the partners, in proportion to the shares they hold) and spreading the risk between the partners, without being subject to the system of joint ownership;
Easier to get a mortgage: banks really like it when several people form an SCI to buy property, and they're more likely to approve a loan to finance your project;
Protecting the personal assets of partners: Because the SCI has its own legal identity, it has its own assets. This means the partners' personal assets are protected, and any debts or profits related to the property are shared among the partners.
Easier to pass on assets to heirs: setting up an SCI makes it easier to pass on property to your children, because you're not actually passing on the property itself, but the shares you own in the company;
Avoid joint ownership: unlike purchasing property in your own name, an SCI is highly recommended to avoid the rules of joint ownership, which often lead to conflicts between joint owners and a forced sale of the property;
Get a tax break when donating shares: Donating shares in an SCI lets you get a tax break based on how closely related the partner and the beneficiary are.
Avoid transfer duties: an SCI allows you to avoid transfer duties typically due during inheritance;
Choose the applicable tax system: With an SCI, you can choose between income tax (IR) and corporate tax (IS).
Income tax (IR): by choosing IR, the partners declare and pay the tax on the company's profits: each partner must declare, when filing their income tax return, the share of profits corresponding to the shares they hold in the SCI;
Corporation tax (IS): If you choose corporation tax, the company pays the tax on its profits. The partners are only taxed if they receive dividends.
However, these two schemes have some drawbacks, which must be taken into account when choosing the system that best suits your project.
Buying real estate in your own name can have some drawbacks:
Financial risks: If you buy a property in your own name, your personal assets are not protected, can be easily seized, and you may be held liable in the event of financial difficulties.
Maintenance and repair costs: if you are solely responsible for managing a property, you will have to deal with maintenance and repair costs, which can be unexpected and substantial;
Joint ownership: Managing a purchase under joint ownership is much more restrictive, especially in the event of a dispute between the property owners (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 out the outgoing member's share or sell the property);
Non-deductible depreciation: depreciation of a property in your name is not deductible, unlike owning a property through a SCI (Société Civile Immobilière, a French property holding company);
Difficulty in decision-making: decisions must be made in agreement with each owner (co-owner), given that each one holds a share of the real estate;
More difficult to obtain a property loan: if you buy the property alone, you must provide sufficient guarantees to obtain a mortgage from banks, whereas if you are several buyers in an SCI, your borrowing capacity will be lower.
Investing in real estate by creating a Property Holding Company (SCI) can also have some drawbacks:
Ownership of the real estate by the SCI: by creating an SCI, you are not directly the owner of your property, which is owned by the SCI;
Complex creation process: Setting up an SCI means following several steps, which can often be a lot of work for someone buying property: registering the SCI, drafting the articles of association, setting up and depositing the capital with a bank, drafting and publishing a legal announcement, etc.
Inability to create and manage an SCI alone: the law does not allow you to create an SCI alone, you need a minimum of 2 partners to create and manage an SCI;
Complex management and accounting: Managing an SCI can be a lot of work, especially with all the administrative, tax, and accounting requirements you have to meet: holding an ordinary general meeting (OGM) at least once a year, preparing minutes of the general meeting, keeping accurate accounts, VAT returns, income statements, etc.
High costs: an SCI requires you to pay certain significant fees, from its creation and throughout its existence. Regarding the costs to anticipate for creating an SCI, include the registration fees for an SCI and the legal announcement fees. Other expenses may also be added if you decide to use an expert or professional to delegate certain tasks: the drafting of your articles of association by a legal professional, the management of your accounting by an accountant, or the domiciliation of your SCI by a domiciliation expert (like SeDomicilier). Note, however, that it is not mandatory to use an accountant for the management of an SCI, even if it is strongly recommended if you (or your partners) have no accounting knowledge.
Investing in your own name or through a Property Holding Company (SCI) is a choice that depends primarily 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, it is necessary to consider a number of criteria:
Remember that a real estate company (SCI) allows you to invest in property for the purpose of renting it out. However, as the property is owned by the company, the lease is signed in its name and the SCI receives the rent and deducts the rental charges.
Conversely, buying in your own name also gives you the option to rent out the property. You'll receive the rent directly, but the rental income will be subject to income tax.
So, if you want to rent out your property, both of these 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 allow you to reduce the associated costs (property purchase price, agency commission, notary fees, etc.).
Keep in mind that if you decide to create a SCI, you'll need to plan for a bigger budget, including the costs associated with setting up the SCI (registration fees and the cost of publishing a legal notice) and possibly additional expenses (like hiring an expert to write your articles of association or manage your accounting).
It is therefore necessary to establish a provisional budget before buying your home.
You can buy property to plan for passing on your real estate assets to your heirs.
Regarding the transfer of assets, the SCI is more advantageous: it makes it easier to transfer your assets by avoiding the joint ownership regime. Indeed, rather than transferring the property, it is your shares that will be transferred to the heirs. This technique allows for a smoother inheritance, 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 through an SCI or be under the joint ownership system?
With an SCI, you get to choose between income tax (IR) or corporate tax (IS), whereas buying property in your own name doesn't give you a choice: you're stuck with income tax (IR).
By creating a property company (SCI), you can choose your tax system based on your and your partners' tax situations.
Income tax (IR) system: The partners are taxed personally on their income and must complete the section relating to property income in their annual income tax return. Each partner is then taxed on their share of the profit.
Corporate tax (IS) system: The company is liable for corporation tax (IS), and the partners are only taxed on the dividends they receive. You may be able to benefit from a reduced rate of 15% if you do not exceed a certain turnover threshold.
An SCI lets you choose between income tax (IR) or corporate tax (IS), depending on the personal situation of the partners and what seems most tax-efficient for you.
It's definitely possible to set up an SCI even after you've bought the property in your own name. Just create an SCI and transfer the property to the newly created company.
Just be aware that this transaction needs to go through a notary because it's considered a transfer.
Do you have a real estate project in mind but you still don't know which status to choose? As you can see, the choice between SCI and personal name depends mainly on the nature of your project and the criteria mentioned above.
