Civil Society Real Estate (SCI): How does it work?
Looking to create an SCI but don’t know how to do it? Are you afraid to lose yourself in the legal subtleties or the complexity of the laws surrounding the IBS? This article will allow you to know everything about this legal form. The SCI or Civil Society Real Estate is a company made up of two or more people who want to acquire and manage together within a legal framework a property or a real estate. In France, this solution is often chosen by families, especially those who face the so-called “indivision”.
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The different forms of the SCI
Let us now look at the different forms of civil real estate companies. There is first the family SCI. This SCI model is perfect when you manage a property or heritage within your family and to set up your estate. Associates in a family IBS are members of the same family. There is also the management or leasing SCI: it is the most common form of IBS in which you can manage and acquire real estate. You can also create an assignment SCI, or you can head a build-sale SCI. The SCI has different features that we will now talk about!
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The characteristics of the SCI
First of all, your SCI must have a registered office. You must also agree with your associates on the contributions. These may be in kind (movable or immovable property) or in cash (sums of money) to form the share capital of the company. Your SCI must be composed of at least two partners, legal or natural persons. You must have a manager, designated by the partners, to represent your SCI, he takes care of the day-to-day management of the company.
What are the benefits of SCI?
If you are a partner, the advantage of SCI is that your assets and that of your associates are protected. The SCI is registered in the register of commerce and companies, its assets are distinct from that of the partners and it is endowed with a legal personality. She is the only owner of the property. As a result, in the event of problems, creditors must first turn to the SCI. If their action does not work, then they can take action against the partners. There are only shares that can be seized by creditors. Indeed, partners have an indefinite responsibility based on their participation in the capital of the SCI, but not in solidarity. This implies that creditors must act against each partner independently, to engage their liability.
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Creating an SCI makes it possible to simplify the transfer of real estate assets. When the estate is not organized, the heirs own the property without their shares being divided and each shareholder-owner can terminate the division. The establishment of an SCI gives heirs shares that they can sell. In addition, this legal form will allow parents to completely exempt themselves from any tax concerning this property, particularly on their IFI (taxation on real estate assets).
The ability to choose a type of tax favourable to your company is one of the many advantages of SCI status. If you opt for Corporate Tax (IS) it allows the SCI to be taxed only on its net income of all loads. In addition, profits earned by an SCI taxed on corporate tax are taxed at a reduced rate per tranche of 15% on the first 38,120 euros, at the rate of 28% for the first 500 000 euros and at the rate of 31% for the higher amounts in 2019. However, this option is irrevocable. In principle, an ITC is subject to income tax. If you create an SCI status you can enjoy the real estate capital gains allowance scheme to which individuals are subject. You will benefit from a tax exemption on capital gains after 22 years of holding and a total exemption after 30 years of holding. In addition, in the event that the SCI is in a deficit, the deficit share is attributable to the total income of the partners up to EUR 10,700. As a partner of an SCI you can sell your shares, which is an advantage!
What are the disadvantages of SCI?
The complexity of legal and administrative procedures is undoubtedly a significant disadvantage to the ICS. It is necessary to prepare and draft articles of association, take care of registration at the RCS, hand over the documents to the tax department, make a publication in the journal of legal announcements and file a file with the CFE of the commercial court. The method of decision-making is also a disadvantage, since it is done at a mandatory general meeting where the accounts must be approved by the meeting of the associates’ meeting.