How to set up a SCI in 2024?
SCI (Société Civile Immobilière)is a legal status that allows you to optimize the management of one or more properties. Its many advantages make it a very useful legal status for managing family assets, investments, or organizing property transfers.
SCI (Société Civile Immobilière) is a legal status that allows you to optimize the management of one or more properties. Its many advantages make it a very useful legal status for managing family assets, investments, or organizing property transfers.
However, for beginners, the administrative procedures involved in setting up an SCI may seem a bit complex. How do you set up an SCI? What administrative procedures do you need to follow, and what documents are required? Micco will guide you through the basic steps involved in setting up an SCI.
Before getting to know SCI, Micco can set up a company bank account for you and help you complete the SCI capital deposit and company reistration process.
Micco stands as an all-in-one financial platform tailored for business creators, facilitating a comprehensive array of services. These include streamlined procedures for company registration, professional bank account establishment, capital deposit management, and more.
Micco's commitment to empowering business creators extends to:
- Effortless company registration processes
- Seamless professional bank account setup
- Convenient capital deposit management solutions
- A suite of additional financial tools and resources catered to entrepreneurs
With Micco, business creators can access a one-stop solution designed to streamline their financial operations and support their growth endeavors effectively.
Table of Contents:
1. What is an SCI?
2. Why Set Up an SCI?
3. What are the Requirements for Setting Up an SCI?
4. Steps to Set Up an SCI
5. Setting Up an SCI: How Much Does it Cost?
6. Summary of Required Documents for Setting Up an SCI
7. Frequently Asked Questions
1. What is an SCI?
1.1 Definition of SCI
SCI (Société civile immobilière) is a company form and thus a legal entity, specifically established for real estate activities. Its purpose can be the purchase, management, or rental of properties.
However, under this legal status, commercial activities or regular purchases of properties for resale cannot be carried out. The identity of property traders should be distinguished from that of the SCI. Similarly, seasonal rentals are not allowed under an SCI.
There are several types of SCIs, and the most suitable structure depends on the business you plan to operate:
- SCI for property development: Allows you to build a property and then sell it;
- Professional SCI: Allows you to buy your own business premises or company headquarters;
- Family SCI: Designed to allow family members to organize the acquisition or management of one or more properties.
How to set up an SCI for a couple?
Cohabiting couples should jointly own the property when purchasing real estate. Establishing an SCI is beneficial for them for several reasons: purchasing and managing joint property, and transferring property upon the death of one partner.
The rules for establishing an SCI for couples are the same as for any other SCI, with the couple being listed as partners in the SCI.
1.2 Main Features of an SCI
Like all companies, an SCI allows you to separate assets from those of the partners. This is done to establish a real estate investment portfolio separate from personal assets.
To establish an SCI, you need at least two partners. These partners can be individuals or legal entities. An SCI can also be managed by one or more managers. Managers can be partners in the company or external individuals.
One characteristic of setting up an SCI, compared to other companies (especially commercial ones), is that partners have unlimited liability for the company's debts using their personal assets. Therefore, the liability of SCI partners is not limited to their contributions. Two points are important:
- Partners do not bear joint and several liability: This means they are only responsible for the company's debts in proportion to their share in the capital. One partner is not required to pay the share that another partner should bear.
- Partner liability is complementary: If the SCI encounters financial difficulties, the partners' own assets are also at risk. This means that creditors of a non-commercial real estate company (SCI) can demand that partners use their own funds to repay company debts, but only after unsuccessful legal action against the SCI.
Another feature of the SCI is that, when establishing the structure, partners can choose to pay either corporation tax (IS) or income tax (IR). This choice can be used to optimize the income tax paid by the partners, depending on their tax brackets.
2. Why Set Up an SCI?
An SCI is synonymous with business flexibility. The company allows partners to organize their relationships flexibly. Additionally, there is no minimum initial investment requirement for an SCI. However, the main attraction of an SCI lies in the tax advantages it offers and the benefits it provides in asset management and transfer.
2.1 Tax Advantages of an SCI
When establishing a non-commercial real estate company (SCI), partners can choose to pay income tax (IR) or corporation tax (IS).
If the non-commercial property company needs to pay income tax, each partner must declare their share of the net profit before tax on their individual annual tax return.
On the other hand, if the SCI is subject to corporation tax, the net profit before tax is declared by the company, and the tax is paid by the company. Partners only need to declare the dividends received on their individual tax return. However, you should be aware that the tax rate may be high.
Before choosing the tax regime for your SCI, many tax issues need to be considered, as once the company opts for corporation tax, this choice is final and cannot be changed.
2.2 Advantages of an SCI in Asset Management
The company's articles of association specify the operation and management of the company. Partners can freely decide whether managers have the authority to buy, rent, or sell properties independently.
Additionally, setting up an SCI can consolidate all property investments under one structure, making management easier. You can designate a manager to free yourself from day-to-day management.
Moreover, costs can be shared. Pooling resources can make it easier to obtain loans or reduce the costs of real estate projects.
2.3 Advantages of an SCI in Asset Transfer
Another significant advantage of setting up a non-commercial property company (SCI) is that assets can be transferred more conveniently. Heirs receive shares in the SCI rather than the property itself. Therefore, transfer taxes are calculated based on the value of the shares rather than the actual value of the property transferred through the SCI.
You can also set up an SCI with your children. This way, they are already partners in the company, making it easier to transfer shares. You can also make early gifts to enjoy related tax benefits.
☝️ Important: How to establish a family SCI without contributing?
One of the main advantages of the SCI is that there is no minimum capital investment required. Therefore, theoretically, an SCI can be established with a capital of just 1 euro. However, in practice, a capital of 1 euro may pose many difficulties for future financing.
⚠️ Please note: SCIs also have some disadvantages, such as the obligation to hold an annual meeting to approve the SCI's accounts, and if managers choose to pay corporation tax, they have an obligation to keep accounts.
3. What are the Requirements for Setting Up an SCI?
When considering how to set up a property company, it's natural to ask what conditions need to be met, especially regarding the partners.
3.1 Number of Partners
The law stipulates that at least two partners are required to set up an SCI. There is no maximum number of partners.
📝Please note: SCI partners can be individuals or legal entities.
3.2 Age of Partners
Contrary to popular belief, minors can be partners in an SCI. Whether the minor is emancipated or not, they can be partners. In the latter case, which is the most common, authorization from a legal representative is required. In practice, this does not pose any problems, as in most cases, parents establish the SCI with the aim of including their minor children.
📝Please note: Minor children who are partners in an SCI also benefit from tax advantages when transferring shares in the company.
3.3 Relationships between partners
There is no specific link between SCI partners. SCIs can be set upbetween friends, between husband and wife, with or without children, between siblings, between cohabitants, between PACS partners, etc.
❓ How to set up a Family SCI?
A Family SCI is a special type of SCI that can only be set up between members of the same family. This means a parent-child or alliance relationship. This form of corporation makes it easier to own, manage and transfer one or more properties.
4. What are the Steps to Establish an SCI?
Setting up an SCI involves various procedures. Here are the four stages involved in establishing an SCI:
- Drafting the company's articles of association;
- Declaration of capital;
- Publishing a legal notice;
- Completing the establishment procedures online.
Of course, these are just outlines, but don't worry; we'll provide a detailed overview of each stage of establishing an SCI.
4.1 Drafting the Articles of Association
Drafting the company's articles of association is the first step in establishing an SCI. The articles of association outline the company's operating rules. For example, in this document, you can specify terms and conditions and grant powers to the SCI manager.
To ensure the most efficient establishment of an SCI, the articles of association should include the following information:
4.2 Declaration of Capital
A reminder that capital is the sum of the contributions made by SCI partners in kind (property) or cash (currency). In exchange for various contributions and their values, partners receive company shares.
Therefore, you need to open a bank account and deposit the cash amount of the SCI's capital into this account.
☝️Keep in mind: There is no minimum amount required to establish an SCI, so theoretically, you can establish an SCI with a capital of €1.
📝Please note: While an SCI is not required to open a commercial bank account, it is strongly recommended in practice to open a commercial bank account to help separate the business of the SCI from the personal lives of the partners.
In practice, capital serves as a financial guarantee for company partners, enabling them to meet potential debts in times of financial difficulty. If you intend to finance real estate purchases with external funding, it's best to have capital aligned with your investment goals.
Once the capital is deposited into the bank, you will receive a deposit certificate. This is an important document for registering the SCI.
4.3 Publishing a Legal Notice
When establishing an SCI, publishing a legal notice in a professional newspaper is a procedure that ensures your initiative is publicized. The purpose of publishing the notice is to inform third parties of your company's formation. This is a mandatory administrative step that benefits your company as it informs potentially interested parties, such as future tenants.
Therefore, it is necessary to announce the registration of the SCI in an approved newspaper. Failure to do so would render the company unregistered and unable to conduct activities.
The legal notice for an SCI must include certain mandatory information:
- Company name (dénomination sociale);
- Legal form (SCI, non-commercial property company);
- Name of the manager
- Address of the SCI's registered office;
- Start date of activities.
The price of the legal notice in 2024 ranges from €185 to €217, depending on the department where the notice is published.
4.4 Completing the Establishment Procedures Online
After completing the steps before registering the company, you'll need to fill out an online business establishment form and submit the required documentary evidence to create the file.
The SCI registration file includes a series of documents, including:
- Original copy of the company's articles of association, dated and signed by the manager;
- Proof of the notice published in the legal gazette;
- Identification of the SCI manager;
- Criminal record declaration of the manager;
- Certificate of property occupancy;
- Declaration of the beneficial owner.
🔧In Practice: Deadline for Creating an SCI:
When the documents for creating an SCI are incomplete, the registrar may submit additional requests (referred to as "refusal of files"). After applying for completion, the registrar will review your application for validity within 24 hours. Note that if your documents are incomplete, the registrar may require you to pay additional fees.
Once the registrar confirms the validity of your application, they will issue the Kbis excerpt, allowing the non-commercial property company to prove its existence and perform all necessary actions. This serves as the identity card for the SCI.
5. Establishing an SCI: What are the Costs?
Each step involved in establishing an SCI incurs costs, so before embarking on the adventure, you should be aware of all the costs associated with setting up an SCI to avoid any unpleasant surprises.
The following table summarizes the costs involved in establishing an SCI:
☝️Note: Partners who prepay costs for establishing an SCI may request reimbursement of these expenses from the company after its establishment. It is only possible to handle the procedure for the recovery of contracts signed by partners if the following two cumulative conditions are met:
- The expenses must be related to the establishment of the business.
- The expenses were incurred within 6 months before the company's registration.
6. Summary of Required Documents for Establishing an SCI
If you're wondering how to set up an SCI in France, you'll need to provide the following documents:
7. Frequently Asked Questions
- What does SCI stand for?
SCI stands for "Société Civile Immobilière" in French. It is a type of non-trading company whose purpose is to engage in activities related to real estate, such as buying, managing, or renting real estate properties.
- Why establish an SCI?
Establishing an SCI has many benefits. It provides tax advantages and benefits in asset management and transfers. It is also known for its operational flexibility.
- Who can establish an SCI?
Establishing an SCI requires the participation of at least two partners, who can be individuals or legal entities. Partners in such structures can be individuals or legal entities, such as another SCI or a commercial company, regardless of nationality. In fact, individuals from both EU and non-EU countries can be partners in an SCI, as long as the laws of their primary residence allow it.
- When should an SCI be established?
You can establish a real estate investment company (SCI) at any time. There are few restrictions on establishing an SCI, but many advantages. It is particularly advantageous in cases of family asset management or joint purchase and management of properties by spouses.
In principle, the company should be established before purchasing real estate. However, an SCI can also be established after the purchase. In this case, alternative clauses should be included in the agreement or sales commitment. These clauses allow the company to replace the original signatories when the transaction is finalized.
- How much does it cost to establish an SCI?
Establishing an SCI involves a series of legal and administrative procedures. The price varies depending on the support you choose or whether you are willing to handle the procedures individually. In summary, you need to consider costs such as drafting articles of association, capital contribution, legal notices, declaration of beneficial owners, and registration fees.
- Can contributions in kind be made when establishing an SCI?
After the establishment of a non-trading property company (SCI), buildings can be contributed as company capital, i.e., contributions in kind. However, rest assured: it is entirely possible to establish an SCI and include real estate in the capital during the company's existence. In this case, you will need to increase the capital.
- Can partners occupy SCI property?
When establishing a non-trading property company (SCI), it should be noted that the company can provide property to partners free of charge or for a fee. Depending on the company's tax regime, providing property to SCI partners free of charge may have different advantages and disadvantages. An SCI can also lease its property to one of its partners. In this case, the leasing conditions for the property are the same as when the SCI leases property to a third party.
Setting up an SCI can be an excellent option for managing real estate investments and facilitating asset transfers. However, it is essential to carefully consider the legal and tax implications before proceeding. Working with a notary and seeking professional advice can help ensure that the process is smooth and compliant with relevant regulations.
As a financial services company, Micco provides comparable services and solutions tailored to the needs of modern businesses. With a user-friendly platform, competitive pricing, and a commitment to customer satisfaction, Micco is a viable option worth exploring.
Whether you're a freelancer, startup, or established enterprise, Micco offers the tools and support needed to streamline financial operations and drive business growth. Check out Micco today to discover how it can complement your business banking needs.
