The differences between SCI and SARL de famille

19 September 2022

When one wishes to invest together with other people, it is essential to choose the most appropriate legal project for the project. In terms of real estate, the most commonly considered legal forms are the SCI and the SARL de famille. In order to choose between these two types of company, it is necessary to understand their differences.

The differences between SCI and SARL de famille : The partners of the company 

The distinction on the quality of the people who can set up such companies is based on two words: “family”. Direct relatives, brothers and sisters, or spouses or civil union partners can only form a family-run LLC. Thus, the criterion is fulfilled for a company formed between spouses, between parents and children, between two brothers and sisters and their spouses… In fact, each partner must be directly related to the others by direct or collateral ties up to the second degree, or by matrimonial ties. Thus, cohabiting partners could not constitute such a company. In the case of the SCI, these ties are of little importance. Two friends can set up a SCI without any problem.

On the other hand, the responsibilities of the partners are not the same depending on the company.

As its name suggests, a LLC is a limited liability company. This means that the partners are committed only to the extent of their contributions: creditors cannot use their private assets to pay their debts.In the SCI, the partners are indefinitely responsible for the debts of their company. The constitution of a SCI company means committing the partners’ private patrimony. Therefore, a creditor can potentially withdraw from these private assets.

The differences between SCI and SARL de famille : The activities of the company

The SCI is a civil company. In fact, it is not supposed to carry out commercial activities, such as furnished rental or para-hotel business, on a principal basis. It can do so, but there is a risk of being fiscally requalified.

According to the nature of the activities, there are 4 types of SCI:

  • SCI de location-gestion (constituted with the aim of acquiring and renting real estate) ;
  • SCI familiale (family real estate investment company which is set up to manage a family real estate asset and to prepare the succession);
  • SCI de construction –vente  (constituted with the aim of building one or more buildings with a view to their sale);
  • SCI d’attribution (constituted with the purpose of acquiring or constructing buildings in order to distribute them among the partners in proportion to their shares).

The SARL de famille, as provided for in article 239 bis AA of the CGI, allows exercising any type of economic activity, with the exception of the liberal professions. Furnished rental is a commercial activity by nature and the family SARL allows acting as a furnished rental company.  Whether the members have a professional status or not, needs to be verified for each one. The partners may thus benefit from the quality of professional furnished renter.

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Who can form such a company?

Anyone can form a SCI. No particular relationship is required between the partners. Only members of the same family can form a family LLC. The partners must be directly related to each other by direct or collateral family ties up to the second degree, or by matrimonial ties.

What is the liability of the partners?

The partners are indefinitely liable for the debts of the company. The partners are liable for the amount of their contributions to the company.

What activities can be carried out?

Civil companies cannot carry out a commercial activity as their main activity. Family-owned LLCs can carry out industrial, craft, agricultural or commercial activities.

How is the company taxed?

SCIs are by default subject to income tax. If a SCI carries out a commercial activity and this represents more than 10% of the company’s total revenues, the company will be taxed under the corporate income tax. The common law system is the one of corporate income tax, but the partners can opt for the partnership system.

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