Bring a building to a family real estate company or an LLC, be careful!

The june 30, 2020

The "family" real estate companies and LLCs (Limited Liability Companies) are companies that allow several people to pool real estate.

A person may prefer the incorporation of a company to the direct ownership of real estate if its objective is to facilitate the management and transmission of its assets.

Real estate companies and LLCs share many common points:

As we have seen, the real estate companies and LLCs are the subject of contributions.

A contribution is said to be pure and simple when the partner receives social rights in return for his contribution. Conversely, a contribution is made against payment when the contributor, in return for his contribution, does not receive social rights but an immediate consideration which can be a sum of money, any good or an advantage.
The qualification of the contribution is very important from a tax standpoint:

Take the example of Mrs. MATHIEU. The latter owns a house rented bare.
Wishing to facilitate the transfer of her house, Mrs. MATHIEU chooses to set up a real estate company.

HYPOTHESIS 1:
Mrs. MATHIEU contributes her house, valued at € 200,000, to the real estate company and in return receives shares valued at € 200,000. This contribution is pure and simple: it is exempt from transfer tax.

HYPOTHESIS 2:
Mme MATHIEU brings her house to the real estate company. The latter takes out a loan and pays the sum of € 200,000 to Mrs. MATHIEU. As this contribution is made against payment, it is subject to transfer rights. Taxation amounts to € 10,000 (200,000 x 5%).

Note: the purpose of this example is to present the tax consequences of the qualification of contributions and does not take into account in particular the fees of the notary, the formalities of land registration, etc.

Is it strategic for you to bring a building to a company? Are you going to make an outright contribution or for a fee? Finally, rather a real estate company or an LLC?

If you wish to benefit from personalized advice, Wealth A7 advisers are available to help you in your strategy for managing and transmitting your wealth.

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Article by : Vincent IZARD

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