How can you buy a property solo through an SCI?

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The Real Estate Civil Company (SCI) has become a popular legal tool for managing and acquiring real estate. While traditionally designed to bring multiple people together around shared assets, an SCI can also be used by an individual wishing to control a property on their own. 

Although subject to certain legal constraints, this approach is common for reasons of management, estate planning, or tax optimization. It is important to analyze how an individual can, while complying with the legal framework, buy a property solo through an SCI by identifying the key steps, benefits, and limitations of this structure.           

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      The SCI: a legal framework suited for real estate acquisition

How does an SCI work?

The SCI is governed by articles 1832 and following of the Civil Code. It allows multiple people to acquire and manage one or more properties together. An SCI is not intended for commercial activities; its primary purpose is the holding, management, and transfer of real estate assets.

Under French law, an SCI mustnecessarily be formed by at least two partners. This requirement distinguishes the SCI from a sole proprietorship or a single-member company, such as an EURL or SASU. However, the distribution of shares can be structured so that one partner holds the vast majority of decision-making power.

Buying solo through an SCI: myth or reality?

It is not legally possible to create a single-member SCI. However, a common practice is to involve a trusted person (a relative, spouse, parent, or child) by assigning them a symbolic share. The primary partner then holds almost all the shares (e.g., 99%), ensuring total control over decisions.

Example : Mr. X wants to purchase an apartment through an SCI. He creates the SCI "@Qlower.com" with his sister, to whom he assigns 1% of the shares, while he retains 99%. He is designated as the manager in the articles of association. Thus, although the SCI meets the requirement for multiple partners, Mr. X maintains complete control over the company and, consequently, the property.

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   Steps to buying property solo through an SCI

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1. Creating the SCI

The creation of an SCI follows a legally regulated procedure. It requires drafting articles of association, registration with the Trade and Companies Register (RCS), and the publication of a legal notice.

The articles of association must be drafted carefully to ensure control by the principal partner. Specific clauses can be included, such as:

Appointing the manager for an unlimited term.

Strict approval clauses to limit the entry of new partners.

Setting the procedures for decision-making in general meetings based on the shares held.

Official source: Service-public.fr, "Creating an SCI".

2. Financing the acquisition

Once the SCI is created, the property purchase must be financed. Financing can be achieved through:

Capital contributions: funds paid by the majority partner to the SCI.

A bank loan taken out in the name of the SCI.

Banks generally agree to finance SCIs provided that the distribution of shares and the financial stability of the partners are clear. The manager (principal partner) must often provide a personal guarantee.

Case study: The "Qlower.com" SCI has a capital of €1,000. Mr. X requests a €200,000 loan from a bank to purchase an apartment for rental purposes. The bank accepts due to the financial stability of Mr. X, who holds 99% of the shares and provides a personal guarantee.

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3. Acquisition of the property by the SCI

The deed of sale is signed by the manager of the SCI. The property then belongs to the SCI, not directly to the majority partner. The partner holds shares that indirectly represent the value of the property.

Example: The "Qlower.com" real estate company (SCI) purchases the apartment. Mr. X is not listed as the owner in his personal capacity on the deed of sale, but he holds 99% of the shares in the company that owns the property.

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   Pros and cons of buying property alone through an SCI

Pros

a) Simplified management and transfer

An SCI is an effective tool for organizing the transfer of real estate assets. You can gradually transfer shares to heirs while maintaining control of the company through specific articles of association.

Reference: Notaires de France, "La SCI : outil de transmission".

Example: Mr. X can plan to transfer shares to his children each year, within the limits of tax exemptions, while remaining the manager of the SCI.

b) Tax optimization

An SCI offers the choice between being taxed under personal income tax (IR) or corporate tax (IS) (Article 206 of the French General Tax Code). The corporate tax regime allows for the deduction of numerous expenses (loan interest, renovations, management fees) and the depreciation of real estate assets.

Example: Under the corporate tax regime, the "Qlower.com" SCI deducts the renovation work carried out on the apartment, which reduces the taxable income.

Regarding the choice of tax regime, it is recommended to consult a professional to understand all the tax implications.

Have tax questions? Book an appointment with our Qlower experts

c) Protection of personal assets

An SCI allows you to separate your private assets from those held by the company. In the event of financial difficulties, creditors can only seize the shares and not the associate's personal property, unless a personal guarantee has been provided.

Cons and constraints

a) Accounting and legal obligations

Even with two nominal partners, an SCI must comply with legal obligations:

Holding general meetings.

Drafting minutes.

Filing annual accounts if the SCI is subject to corporate income tax (IS).

b) Capital gains tax

If the property is resold, the applicable tax depends on the chosen regime. Under corporate income tax (IS), the capital gain is calculated based on the net book value of the property, without the benefit of the holding period allowance available to individuals as in LMNP [MAILLAGE].

Example : If the SCI sells the apartment after 10 years, the taxable capital gain may be higher under corporate income tax (IS) than under personal income tax (IR) because the flat tax (30%) must be added to dividends, and the SCI does not benefit from holding period allowances starting from the 6th year or total exemption after 30 years.

Still deciding between LMNP or an SCI subject to corporate tax? Book an appointment CTA free tax audit

c) Risk of abuse of law

The tax authorities monitor arrangements deemed artificial. An SCI created solely to avoid taxes or circumvent inheritance rules could be recharacterized.

• Buying a property alone via an SCI is a perfectly viable operation within the legal framework, provided you include at least one second partner, even if only nominally. This structure offers numerous advantages in terms of management, succession, and tax optimization, but it also entails administrative obligations and increased vigilance regarding tax risks. Guidance from a notary or an accountant is essential to secure the operation and ensure the structure is compliant. The SCI therefore remains a relevant tool for structuring a real estate investment, even when managed by a single person.

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