When planning a real estate project as a family, it's essential to consider which legal structure to choose.
Here are two popular options:
- The Société Civile Immobilière (SCI) (Real Estate Civil Company)
- The family SARL.
Each of these structures has its own specific characteristics, advantages and disadvantages, depending on the management, transfer and tax objectives.
The SCI is generally preferred for managing property assets, allowing the property to be separated from the personal assets of the partners. It also offers advantages when it comes to transferring assets within the family.
However, the family SARL, while allowing flexible management of real estate assets, can also be used for commercial activities such as non-professional furnished rentals (LMNP). This choice can also be compared to other options, such as SCI vs LMNP, depending on your tax and wealth objectives.
In this article, we will explore these two structures, their main characteristics, their advantages and disadvantages, in order to guide you in choosing the solution that best suits your family projects. Find out how SeDomicilier can help you make the best choice based on your specific needs.
Understanding the basics of SCI and Family SARL
Before diving into a family real estate project, it's essential to understand the basics of the two main legal structures available: the Société Civile Immobilière (SCI) (Real Estate Civil Company) and the SARL de famille (Family SARL). Each one meets specific needs, depending on the partners' asset and tax objectives.
When you are choosing between a SCI or a family SARL, it is sometimes necessary to think about business domiciliation, a useful service for any legal structure, whether it is a SCI or a family SARL.
The Société Civile Immobilière (SCI) (Real Estate Civil Company)
An SCI is a legal structure designed for managing real estate. Creating an SCI allows several people (usually family members) to come together to purchase and manage one or more properties.
The main advantage of the SCI lies in its flexibility in terms of asset management and transfer. Indeed, the partners can choose to implement a shared management of the property, with a distribution of profits according to the shares held.
From a tax point of view, SCIs are generally subject to income tax (IR), which means that the profits are directly taxed in the hands of the partners, depending on their share in the company. However, it is also possible to opt for corporate tax (IS), which can reduce taxation in some cases, especially for rental management.
The family SARL.
The family SARL is a variant of the Société à Responsabilité Limitée (SARL), in which all the partners are members of the same family. It combines the advantages of a commercial structure with an adapted tax regime. In fact, the family SARL can carry on a commercial activity while benefiting from an advantageous tax regime, by opting for income tax (IR) rather than corporation tax (IS). This option is particularly attractive for non-professional furnished rentals (LMNP).
Like the SCI, the family SARL limits the liability of the partners to their contributions, which protects their personal assets. It is therefore more suitable for property projects that include a commercial activity, such as furnished rentals.
Pros and cons of the SCI
The Société Civile Immobilière (SCI) (Real Estate Civil Company) is a popular choice for managing family real estate assets. However, before diving into this structure, it's important to understand the steps involved in setting it up and the tax implications. If you're wondering how to create an SCI, there are detailed guides available to walk you through the necessary procedures and legal formalities.
Advantages of the SCI
1. Flexible management of real estate assets
One of the main advantages of an SCI (Société Civile Immobilière, a French property company) is the ability to manage property collectively as a family. Each partner holds shares that correspond to a portion of the property, making shared management easier. This setup helps optimize management, especially when it comes to sharing rental income or making important decisions about the property.
2. Facilitated transfer of assets
An SCI allows for gradual transfer of assets within the family. You can transfer shares to your children or other family members while keeping control of the property. This transfer can be done without having to sell the property, which preserves the family's assets and reduces gift taxes thanks to the distribution of shares.
3. Tax optimization
By opting for income tax (IR), the SCI allows partners to benefit from taxation on profits in proportion to their shares, which is often more fiscally advantageous than corporate tax (IS). In addition, the SCI can deduct certain expenses related to the management of the property (such as management fees, repairs, etc.), thereby reducing the taxable income.
Disadvantages of a Property Holding Company (SCI)
1. Complex management
Although the SCI allows for collective management, it can sometimes lead to complications, especially when decisions must be taken unanimously or by a qualified majority. In addition, administrative and accounting management can be burdensome, especially if the SCI owns several properties or if there are many partners.
2. Unlimited liability of partners
Although the partners benefit from a limitation of liability in the event of SCI debts, there is nevertheless a risk regarding the liability of the partners towards the company's creditors. In the event of mismanagement or significant debts, the partners may be held liable up to the amount of their share in the company.
3. Administrative costs and unfavourable taxation in some cases
Setting up and running a SCI involves costs, especially for drafting the articles of association, notary fees, and annual accounting. Also, while opting for corporation tax can be beneficial in some cases, it leads to double taxation when dividends are distributed.
Pros and cons of the family-owned SARL
If you're asking yourself "which status should I choose for my company?", it's essential to understand the advantages and constraints of each legal structure. The family SARL, for example, allows you to combine commercial activity and property management, but other options may also be considered depending on your tax and wealth objectives.
Advantages of the Family SARL
Limited liability of associates
One of the main advantages of the family SARL is the limited liability of the partners. In the event of company debts, the partners only risk losing their contributions and not their personal assets. This protection is a major advantage for real estate investors, especially when projects are large-scale.
Tax flexibility
The family SARL benefits from significant tax flexibility, particularly by choosing income tax (IR) rather than corporation tax (IS). This choice is particularly advantageous for property owners who want to avoid the double taxation that is common with corporation tax. The family SARL can thus benefit from lighter taxation, particularly for non-professional furnished rental (LMNP) projects.
Suitable for commercial activity
In addition to its ability to manage real estate, the family SARL is a commercial structure, which allows it to integrate commercial activities, such as furnished rentals. This model is ideal for people wishing to develop a commercial activity linked to real estate, while benefiting from limited liability protection.
Disadvantages of the family-owned SARL
Complex management
The family SARL, although more flexible than a classic commercial company, can be complex to manage due to administrative and accounting formalities. Setting up a transparent and efficient management system can lead to additional costs, especially if accounting experts need to be consulted.
High payroll taxes
As a commercial structure, the family SARL is subject to social charges on the remuneration paid to the partners. These charges can be high, especially if the partners receive a salary or dividends. This is a major disadvantage compared to the SCI, where the partners are less exposed to this type of charge.
Less flexible than the SCI in terms of transfer
Although creating a family SARL allows for the transfer of shares, the transfer of assets is not as smooth as with an SCI. Indeed, share transfers are more regulated by the rules of the SARL, which can complicate the gradual transfer of real estate assets between family members.
Practical comparison: Property Investment Company (SCI) vs Family Limited Liability Company (SARL)
When you're trying to pick between a SCI and a family SARL, it's key to really get what makes each one different. Here's a handy comparison to help you figure out which option works best for your property plans.
Comparison of main features
Concrete use cases
SCI
If your goal is to manage family property and make it easier to pass on without selling the assets, an SCI is the perfect choice. It allows you to bring together several family members to acquire real estate, while separating personal assets from those of the company. An SCI is also advantageous if you want to optimize rental management and the distribution of profits between partners.
Family SARL
The family SARL is preferable if your property project includes a commercial activity, such as non-professional furnished rental (LMNP). It allows you to benefit from an advantageous tax regime while benefiting from limited liability, which protects the partners against the company's debts. In addition, if you are considering a parallel commercial activity (for example, a business in a property), the family SARL is the most suitable legal structure.
Points to consider when making your choice
Project type
If your project is purely real estate, an SCI will probably be more advantageous. However, if you combine real estate and commercial activity, a family SARL may be more appropriate.
Taxation
If you want a flexible tax system, the SCI, with its option for income tax (IR), is ideal. The family SARL also allows this option, but it's more geared towards commercial activities.
Transfer of assets
SCIs offer great flexibility in the gradual transfer of shares. In contrast, family SARLs have stricter restrictions on share transfers.
The choice between a SCI (Real Estate Civil Company) and a family SARL (Limited Liability Company) depends on several criteria, which vary depending on the nature of your real estate project, your tax objectives, and how you want to manage and pass on your assets. Here are some tips to help you make the best choice based on your needs.
Real estate project type
If your project is mainly real estate based and you want to manage one or more properties as a family, an SCI is often the most suitable choice. It allows you to separate the management of real estate assets from your personal finances, while offering great flexibility in the management and transfer of assets. If you are not planning any commercial activity, an SCI is clearly the structure to favor.
Commercial activity related to real estate
If you intend to rent furnished properties (non-professional furnished rental, LMNP) or manage a commercial activity, the family SARL may be more advantageous. Indeed, it allows you to carry out a commercial activity while benefiting from a lighter tax system via the option for income tax (IR). It is particularly suitable for those who wish to combine real estate management and commercial income in a framework protected by the limited liability of the partners.
Taxation and profit management
The SCI offers great tax flexibility. By opting for income tax (IR), you can declare property income directly on the partners' tax returns. This can be advantageous if you don't want to incur the heavy social security contributions associated with corporation tax. On the other hand, if you prefer to opt for corporation tax (IS), this can be attractive if you want to benefit from specific tax deductions and lower taxation on profits reinvested in the company.
Transfer of assets
If asset transfer is one of your goals, the SCI offers you great flexibility. You can transfer shares without having to sell the properties, which simplifies the gradual transfer of your real estate assets to your family members. The family SARL, although also allowing the transfer of shares, has more restrictions and is less flexible in terms of transfer.
In conclusion, the choice between an SCI and a family SARL largely depends on the nature of your property project, your tax objectives, and your priorities in terms of asset management and transfer. If your main objective is to manage property assets and gradually transfer them within the family, the SCI will probably be the most suitable choice, thanks to its flexibility and tax advantages.
However, if you're planning to add a commercial activity to your real estate project, such as non-professional furnished rentals, the family SARL will be more advantageous. It offers limited liability for the partners and flexible taxation, which is particularly attractive for those wishing to manage a commercial activity linked to real estate.
Whatever you choose, it's important to really think about what you need and get some tailored advice. If you want to know more about picking the right legal structure for your property project, SeDomicilier is here to help you out and guide you through the process.
