What is an SCI (REIT)?

What is a SCI?

A SCI is a type of civil company whose purpose is to manage one or more real estate assets. It is created by at least two people, who join together to buy a real estate property together and manage it. The associates of the SCI are owners of shares, which represent their share in the capital of the company.

The creation of a SCI is done by drafting bylaws, which define the operating rules of the company. The bylaws must specify the social object of the company, the distribution of shares among the associates, the terms of transfer of shares, the powers of the associates, etc. Once the bylaws are drafted, they must be registered with the commercial court registry. This formality allows the SCI to be created and to have a legal personality distinct from that of its associates.

 

The advantages of the SCI

The creation of a SCI presents several advantages, particularly in terms of real estate asset management. Indeed, the SCI allows several people to pool their financial resources to buy a real estate property together. It also offers great flexibility in the management of the company and allows for a distribution of powers among the associates.

The SCI also allows the limitation of the liability of the associates to the amounts they have invested in the company. This legal protection is particularly interesting in case the management of the real estate property could lead to disputes or debts.

Finally, the SCI offers interesting tax benefits. Indeed, it is subject to corporation tax, which allows for a more advantageous tax rate than that applied to rental income received by individuals. The SCI also allows the deduction of certain charges related to the management of real estate (works, loan interests, management fees, etc.).

 

The disadvantages of the SCI

Despite its many advantages, the creation of a SCI also presents certain disadvantages that should be taken into account. First of all, the creation of a SCI can be expensive, especially due to notary fees and registration fees.

In addition, the management of the SCI can be complex, especially due to the distribution of powers among the associates and the operating rules of the company. It is therefore important to draft the SCI bylaws carefully and to provide for the decision-making procedures within the company.

Finally, the SCI cannot carry out a commercial activity, unless this activity is incidental to its social object. This limitation can be restrictive for people who want to develop a commercial activity related to real estate, such as renting furnished properties or managing rentals on behalf of third parties.

It should also be noted that the SCI is subject to corporation tax, which can be a disadvantage if the associates want to recover the profits of the company for personal use. In this case, the profits of the company must be distributed in the form of dividends, which are subject to income tax.

Finally, the creation of a SCI does not allow for the avoidance of inheritance tax. Indeed, the shares of the SCI are part of the estate and can therefore be subject to inheritance tax in case of the death of one of the associates.

 

How to create a SCI?

The creation of a SCI requires the drafting of bylaws, which must be registered with the commercial court registry. The bylaws must specify the social object of the company, the distribution of shares among the associates, the terms of transfer of shares, the powers of the associates, etc.

It is also necessary to choose a name for the SCI, which must be unique and not infringe on the rights of third parties. The name of the SCI must be mentioned in the bylaws and must be followed by the mention “civil real estate company” or the abbreviation “SCI”.

Once the bylaws are drafted and registered, it is necessary to proceed with the registration of the SCI with the commercial register (RCS). This formality allows for the obtaining of a SIREN number and the creation of the SCI.

 

Conclusion

The SCI is a legal form of company that offers many advantages for the management of real estate assets. It allows for the pooling of financial resources of several people, offers great flexibility in the management of the company, and allows for the limitation of the liability of the associates. However, the creation of a SCI can be expensive and complex, and the company is subject to corporation tax. It is therefore important to draft the SCI bylaws carefully and to provide for the decision-making procedures within the company. It is recommended to consult a lawyer specialized in corporate law to obtain personalized advice and to be accompanied in the project.