2023-12-28 20:01:09
The Société Civile Immobilière (SCI) is a popular means of managing and organizing the possession of real estate between several people. Although it has many advantages, it is essential to take into account certain disadvantages which can arise from this entity. In this article we will explore the different negative aspects which may result from the creation of an SCI.
Administrative complexity and creation costs
First of all, there are certain restrictive administrative procedures when creating an SCI. Indeed, you will have to draft legal statutes, containing in particular the corporate purpose, the head office, the lifespan of the company, the contributions of each partner, etc. It is also necessary to complete various specific forms, register in the Trade and Companies Register, and publish a notice of incorporation in a Legal Announcements Journal. These procedures also generate costs which can prove costly, especially for smaller structures.
Indefinite liability of partners
Unlike other types of companies where the liability of shareholders is limited to their contributions, that of the partners of the SCI is indefinite. It means that each partner is jointly and severally liable for the debts of the SCI in proportion to its shares. This disadvantage can represent a higher risk for the partners, who have reduced real estate assets and debt pooling.
Management difficulties in the event of conflict
When there are several partners within an SCI, conflicts may arise between them. These management difficulties can result in a collective and unanimity decision that is difficult to obtain or even the involuntary obstruction of the proper functioning of the company. To avoid these problematic situations, it is often advisable to choose your partners carefully before creating an SCI and set clear rules in the statutes regarding the decision-making process.
Limitation of the activities of the SCI
The creation of an SCI mainly allows the management and development of real estate, which therefore limits the possibilities for commercial and professional activities within the company itself. For example, you cannot carry out furnished rental activities or carry out operations of goods dealers.
Taxation and social charges
As the SCI is subject to a special tax regime, this means that its rental income is subject to income tax in the property income category. Depending on the tax bracket of the partners, the tax burden of the SCI can be significant and represent a disadvantage. In addition, partners must also pay social security contributions on their rental income: social security contributions, CSG, CRDS, etc.
More restrictive provisions for SCIs at the IS
It is possible to opt for the imposition of the SCI on Corporate Tax (IS) rather than income tax. This option has advantages, but comes with certain constraints:
- The company’s profits are taxed at the standard corporate tax rate,
- The taxation applicable in the event of transfer of real estate assets may be less advantageous since it results in two levels of taxation: a corporate tax on the sale and the payment of capital gains tax on the shares,
- Loan interest cannot be deducted if the real estate is rented to non-partners or if it is made available to the partners free of charge.
Complex inheritance transfer
Although an SCI generally facilitates the transfer of real estate assets, it can sometimes prove more costly in certain situations such as for the tax assessment of shares.
Inheritance taxes
Indeed, upon the death of a partner, inheritance tax will be calculated on the value of the shares of the SCI and not the real estate directly. This assessment may therefore be higher than if the transfer had been carried out in full ownership, depending on the value of the property and the debts.
Consider the disadvantages before getting started
Create a Real Estate Civil Society presents certain disadvantages that must be weighed carefully before committing to this type of legal structure. The main negative aspects include: administrative complexity, creation costs, indefinite liability of partners, management difficulties in the event of conflict, activity limitations, taxation and social charges, as well as inheritance constraints. Taking all of these elements into account will then allow you to decide if an SCI is a good choice for your particular situation.
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