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Investing with Others: All you need to know about Real Estate Civil Society (SCI)

Posted by Michel on January 3, 2022

With rising property costs, it’s not always simple to come up with the finances or income you’ll need to make a real estate investment on your own. Similarly, accumulating family money, for example, requires safe monitoring in the case of a dispute or departure from one of the members.

The real estate civil society was founded on the notion of enabling a group of individuals (at least two) to invest in real estate jointly, cheaply and with the ability to withdraw at any moment. An excellent way to save for retirement while also sharing the hazards of investing.

A company dedicated to real estate investment

The real estate company (SCI) is a legal organization that is similar to a corporation, but it is made up of partners and has a real estate and non-commercial goal. The company’s assets are split into shares, which are owned by each partner in proportion to their contribution. The number of partners isn’t restricted, and they all participate in the group’s earnings or losses, based on how much of each they own.

The day-to-day administration of the purchased property (s) is handled by a manager chosen by all of the partners without consulting them. The earnings are taxed as income, with each partner needing to disclose his portion of the land revenue first.

The SCI differs from joint ownership

The purchase of joint ownership property is common: each joint owner pays a monetary amount in exchange for a piece of the property, similar to how the SCI operates. In certain circumstances, such as an inheritance, co-ownership is automatically applied.

The essential distinction between the SCI and the co-owners is that the co-owners’ rights extend to the whole property, but the SCI partner’s rights are limited to his own shares. In contrast to the SCI partner, who can just retain his shares, a co-owner may entirely prohibit the sale of the property from the time the partners control the majority of the shares.

The same is true for day-to-day decisions, which need the consent of each co-owner in joint ownership but which, in SCI, may be made only by the management provided the articles of association grant him authority in the relevant area.

Certain advantages for the investor

The possibility of selling one’s shares

Aside from making management easier by appointing a manager whose powers are defined – and limited – by the articles of association, the SCI allows any partner to resell his or her shares at any time with the consent of the other partners or the sole manager and according to the rules set forth in the articles of association: this is the approval procedure.

The task might be delegated to a colleague or a third party. In the event that an agreement cannot be reached, the other partners are required to purchase back the shares: a partner cannot be held against his will. He may also use his right of withdrawal to reclaim his initial investment, with the paid-up shares being allocated to the surviving partners.

Note that in the case of a partner’s death, his shares will be freely passed to his heirs, or with an approval process if the articles of organization allow it.

A progressive exemption from taxation on capital gains

In terms of tax benefits, the SCI enables you to benefit from a progressive decrease in capital gains tax based on the number of years you have been a member of the SCI. After 6 years, the benefit kicks in, with a 6% decrease in the relevant tax. The exemption is now complete after 22 years! Capital gains are likewise excluded from social security payments after 30 years.

Please note that this advantage is generated by the amount of years spent in the SCI, not the number of years spent owning an asset. Thus, even if the SCI has recently purchased one or more commodities, a partner who has been with the company for more than 22 years chooses to dispose his shares will be free from capital gains tax!

Easily pass on your heritage to your children

Finally, the SCI allows him to make consecutive shares contributions to his heirs, resulting in the right to successive deductions and a decrease in donation rights. The inheritance tax exemption is available just once every 15 years.

Beware of the limits of the SCI!

A somewhat tedious creation

The SCI is first and foremost a corporation, subject to the same restrictions as any other corporation, beginning with the need to create articles of incorporation, which may be difficult for newcomers. Their significance, however, is critical: they will set the company’s rules of existence, such as processes for making decisions by majority or unanimity, as well as those governing withdrawal from the SCI.

A significant cost at the start

The creation of the laws should be assigned to a professional who is capable of include all of the safeguards required by the partners as well as providing advise on how to avoid any future issues. It will incur a variable cost for its involvement, which might easily exceed several thousand euros. In addition, the cost of filing a legal notice will range from € 170 to € 300.

A binding operation

The SCI, like other corporations (excluding micro-enterprises), needs a general meeting of shareholders once a year, with the requirement to keep minutes. The amount of accounting that should be guaranteed will be determined by the SCI’s tax position on the management side.

An indefinite responsibility

Without any condition restricting the risk taken, the partners of a SCI are accountable for any losses on their own money. As a result, the decision-making authority of the partner selected as manager must be limited, or else he would be unjustly penalized for his management mistakes.

How to create your SCI?

Finally, provided the aforementioned constraints haven’t deterred you, you’re ready to start working on your SCI in earnest. As a result, you’ll need to put together your own team of investors, which will be made up of two or more persons who are connected by blood or are wholly alien.

A minor may become an associate either willingly or with the permission of his legal representatives if he is emancipated. A minor, like an adult, is accountable for any losses.

As a result, the following stages will be as follows:

• deposit the share capital;

• issue a legal notice;

• compile a registration file;

• submit the registration file with the clerk of the commercial court to which the SCI’s main office belongs, using a Cerfa form;

• obtain the K-bis.

Make careful to modify the legislation to your own situation: even while significant general guidelines apply the majority of the time, tailor-made is vital. The newly appointed manager must also be capable of solid and accurate administration of the organization, with a special focus on account preparation. This will be used to get the accounting authorized by the partners, as well as to determine each partner’s taxation: be wary of mistakes!

The SCI is often used by members of the same family to simplify property administration or estate planning. It’s also gaining traction among groups of investors because of its power, which allows them to double their investments and develop their assets more rapidly while minimizing risk. The intelligent design of the articles of association is clearly the secret to this company’s success: if they are appropriate, it is possible to invest in peace and become the owner of your own real estate empire. Why not make it yours?

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