The SARL, a limited liability company, is one of the most common types of businesses in France. That said, it is a bit unknown in the field of real estate. The company must be composed of at least two partners. If you are alone, you can create a EURL (a single-member company with limited liability). In the case of the Family SARL, this one obliges the SARL to be constituted of the members of the same family in the direct link (children, parents, grandparents, brothers and sisters, spouses, persons linked by a Pacs or marriage) and only that! The creation of a family SARL with his niece or uncle is impossible (for example). In this case, it will turn to the SCI (Civil Society for Real Estate).
In front of the law
The liability of the partners is limited according to the contribution to the capital of the company. However, it will be difficult to get a mortgage with small capital. It will then be necessary to increase the contribution or to stand surety for the SARL.
There are three major families of SARL, the “classic” SARL, the family SARL, and if you want to start alone, the SARL Unipersonal (or EURL). For the latter, you can at any time change its status upon the entry of a new partner.
Furnished rentals and social contributions
The notable difference between SARL family / EURL and SCI is that it is possible to obtain the scheme “rented-out, non-professional, furnished properties” (LMNP). It is possible to be taxed on income so it is important to be advised. In addition, when you are alone (EURL), you will not pay social security contributions if your income is equal to or less than 23,000 Euros per year. However, this is appreciated by family members in the company. For example, if you are four partners, this threshold is increased to 92 000 Euros!
Real estate gains are part of the professional gain regime because the company’s business is commercial. It is interesting to note that long-term real estate capital gains benefit from a 10% reduction per year of detention beyond the fifth year. In other words, capital gains are totally exempt after 15 years (against 22 years for individuals (or SCI) and even 30 years on the social security part).
Transmission of shares
The family SARL allows the dismemberment of shares (possibility of separating usufruct, and bare property). If you keep the usufruct (you continue to collect rents) and you give your children the bare ownership, the amount of inheritance tax will generally be very low since calculated on a lump sum according to the age at which you make the donation. One can see a certain advantage of passing on one’s shares when the company is in debt.
When an LMNP investment is subject to VAT (20%), it can be recovered 6 months after the acquisition of the property. In order to dispose of this recovery, your property must be in one of the following categories:
- Accommodation services provided in classified tourist hotels
- Accommodation services provided in classified or approved holiday villages
- Accommodation provided in tourist homes classified when they are intended for the accommodation of tourists and are rented by a contract for a period of at least 9 years to an operator who has subscribed to a tourism promotion commitment to overseas
You must also offer 3 of these benefits, whether for free or for a fee:
- The breakfast
- Daily cleaning of the premises
- The supply of linen
- Customer reception
It will not sell the property before 20 years, otherwise, the VAT will have to be refunded to the State pro rata. If you have a commercial lease, it will then be necessary to sell your property with the latter to avoid being liable.
Set up costs
It is necessary to write the statutes before depositing them at the clerk’s office of the Commercial Court and to advertise them in newspapers of legal announcements. This is between 1000 € and 2000 €.
The company is managed by one or more managers appointed from among the partners or outside them. They must be natural persons. The manager has powers which are defined in the statutes of the family SARL. The partners meet at least once a year in an ordinary general meeting. Decisions leading to a modification of the statutes are taken at an extraordinary general meeting.
Change of regime
When you choose the corporation tax, you can not go back to income tax. A change is possible the other way around…
If you choose the income tax
The SARL, since it carries out economic operations for a fee, is a taxable person and, as such, is liable for VAT. When you recover the VAT on the amount of the property, you will have to pay a VAT of 20% to the state on the rents perceived for the classical regime. For LMNP property in a senior, student, business or tourism residence, a rate of 10% applies. Finally, regarding the property Leaseback LHPE residence type, the VAT is 5.5%.
If you choose the corporation tax (IS).
For companies with a turnover of less than 7,630,000, the IS tax is as follows:
- Profit range from 0 to 38.120 euros, the IS rate is 15%.
- from 38,120 to 75,000 euros, the IS rate is 28%.
- above 75,000 euros, the IS rate is 33.33%.
For companies whose turnover is between 7,630,000 and 50,000,000 €, the tax is as follows:
- Profit range from 0 to 75,000 euros, the IS rate is 28%;
- above 75,000 euros, the IS rate is 33.33%.
For companies with sales of more than 50,000,000 euros, the IS rate is 33.33%.
The territorial economic contribution
Like any natural or legal person who, in France, normally carries out a self-employed professional activity, the SARL is liable for the territorial economic contribution (formerly business tax). New businesses escape this tax for the year of their creation.
A real estate company has more advantages for less inconvenience than SCI. However, it will be very careful to respect the requirements of a family SARL if you want to make the most of the furnished rental.