You’ve found a property, the numbers look good, and you’re ready to jump into rental investment. But then comes the question that stops everyone in their tracks : what legal structure should you use ? In France, this decision has massive implications – on your taxes, your liability, your ability to grow, and even what happens to the property when you die. Get it wrong and you could be paying thousands more in tax every year for no good reason. The three main options are buying in your personal name, using the LMNP status (Loueur Meublé Non Professionnel), or setting up an SCI (Société Civile Immobilière). Each one works differently, and the best choice depends entirely on your situation.
Why the Right Structure Matters More Than You Think
This is one of those topics where generic advice can actually cost you money. Your tax bracket, your family situation, whether you’re buying alone or with someone, whether you want to do short-term or long-term rental – all of this matters. If you’re still in the early stages and exploring what kind of property to buy, especially for seasonal or holiday rental, https://www.achat-residence-secondaire.fr covers the second-home buying process in detail. But right now, let’s focus on the structure question, because that’s where most people get stuck.
Buying in Your Personal Name : The Default Option
Most first-time investors buy property in their own name. It’s the simplest route – no company to set up, no articles of association, no extra accounting costs. You buy, you rent, you declare the income on your personal tax return. Done.
For unfurnished long-term rental (location nue), rental income falls under the “revenus fonciers” category. You get two options. The micro-foncier regime gives you a flat 30% deduction on gross rental income if you earn under €15,000 per year from rent. Above that threshold – or if your actual expenses are higher than 30% – you switch to the régime réel, which lets you deduct mortgage interest, maintenance costs, insurance, property tax, management fees, and more.
The régime réel can create a deficit foncier – meaning your deductible costs exceed your rental income. That deficit (up to €10,700 per year) can be offset against your overall taxable income. That’s a genuine tax advantage, especially in the early years when mortgage interest is highest.
The downside ? Rental income in your personal name gets added to your other income and taxed at your marginal rate. If you’re already in the 30% or 41% bracket, plus 17.2% in social charges, you’re handing over roughly half your rent to the tax authorities. That hurts.
LMNP: The Favourite Structure for Furnished Rentals
LMNP stands for Loueur Meublé Non Professionnel – basically, non-professional furnished rental. And frankly, for a lot of investors, this is the sweet spot. It’s not a company. It’s a tax status you apply for when renting out a furnished property, and the tax treatment is significantly more favourable than standard unfurnished rental.
To qualify as LMNP, your total furnished rental income must stay under €23,000 per year and represent less than 50% of your household’s total income. Go above those thresholds and you become LMP (Loueur Meublé Professionnel), which is a different regime with different rules.
Under the micro-BIC regime, you get a 50% flat deduction on rental income (or 71% for classified tourism rentals – though recent reforms have been tightening this). That’s already better than the 30% you get with micro-foncier on unfurnished property.
But the real power of LMNP is the régime réel simplifié. Under this regime, you can deduct all your actual expenses – mortgage interest, insurance, management fees, furniture, repairs – plus you can depreciate the property itself. The building (excluding land) is typically depreciated over 25 to 30 years, furniture over 5 to 10 years. This depreciation is a non-cash deduction that can bring your taxable rental income down to zero. Legally.
Let me put that in numbers. Say you earn €12,000 a year in furnished rent. Your deductible expenses come to €4,000. Your annual depreciation amounts to €8,000. Your taxable income : zero. You’re collecting rent and paying no income tax on it. That’s not a loophole – it’s how the system is designed.
The catch ? You need to keep proper accounts. That usually means hiring an accountant, which costs around €500 to €800 per year. But given the tax savings, it pays for itself several times over in most cases.
One important thing to note : the depreciation cannot create a tax deficit under LMNP. If your depreciation exceeds your income after expenses, the unused portion is carried forward – it doesn’t reduce your other taxable income. That’s a key difference with the SCI option.
SCI: When You’re Building Something Bigger
An SCI – Société Civile Immobilière – is a civil company specifically designed to hold real estate. It requires at least two partners (associés), articles of association, registration, and annual accounts. So right off the bat, it’s more work and more cost than buying personally or using LMNP.
Why bother then ? Two main reasons : managing property with others and estate planning.
If you’re buying with a partner, a friend, or family members, an SCI gives you a clean legal framework. Each partner holds shares proportional to their investment. Decisions are governed by the articles of association. If someone wants out, they sell or transfer their shares – you don’t have to sell the property itself. Compare that with buying in co-ownership (indivision), where any co-owner can force a sale at any time. Messy.
For estate planning, the SCI is genuinely powerful. You can gradually transfer shares to your children while keeping management control. Each parent can gift up to €100,000 in shares to each child every 15 years, tax-free. Over time, this lets you pass on significant property value without triggering inheritance tax. Try doing that with a property held in your personal name – it’s far more complicated.
Now, the tax side. An SCI can be taxed under income tax (IR) or corporate tax (IS). Under IR, each partner declares their share of the rental income on their personal tax return – the tax treatment is essentially the same as owning directly. Under IS, the company pays corporate tax on its profits (15% on the first €42,500, then 25% above that), and you only pay personal tax when you distribute dividends.
The IS option lets you depreciate the property (like LMNP) and deduct a wide range of expenses. On paper, the annual tax bill can be very low. But here’s what catches people out : when you sell a property held in an SCI subject to IS, the capital gain is calculated on the depreciated value, not the purchase price. So if you bought for €200,000, depreciated €80,000 over the years, and sell for €250,000, your taxable gain isn’t €50,000 – it’s €130,000. That’s a nasty surprise if you haven’t planned for it.
Under IR, you benefit from the private capital gains regime, which includes allowances based on how long you’ve held the property. After 22 years, you’re fully exempt from income tax on the gain. After 30 years, fully exempt from social charges too.
LMNP vs SCI: Head-to-Head
Here’s where the comparison gets practical.
For a single furnished rental property, held by one person or a couple : LMNP wins almost every time. The tax advantages are excellent, the setup is minimal, and you don’t need to run a company. If your rental income stays under the LMNP thresholds, there’s rarely a reason to complicate things with an SCI.
For multiple properties or a larger portfolio : an SCI under IS starts making more sense. You can reinvest profits within the company at a lower tax rate, scale more easily, and structure financing through the company. But you’re committing to a corporate structure with all the obligations that come with it – annual accounts, legal formalities, potentially higher accountancy fees.
For family or partnership investments : SCI is the natural choice. It provides a proper legal framework for shared ownership and makes succession planning much smoother.
For short-term or seasonal rental : LMNP is typically more suitable, especially with the micro-BIC deduction for tourism rentals. An SCI can do furnished rental, but if it’s under IR, there are complications – furnished rental is considered a commercial activity, which can trigger a mandatory switch to IS. That’s a detail many people discover too late.
What About Buying in Your Personal Name for Furnished Rental ?
Quick clarification, because this confuses people. LMNP isn’t a separate legal structure – it’s a tax status. You still buy the property in your personal name. The difference is that you’re renting it out furnished and declaring the income as BIC (industrial and commercial profits) rather than revenus fonciers. So when comparing “personal name vs LMNP,” you’re really comparing unfurnished rental in your own name vs furnished rental in your own name with LMNP status.
The choice between furnished and unfurnished depends on your market. Furnished works best in cities with student demand, tourist areas, or for short-term lets. Unfurnished is more common for standard long-term residential rental. The tax treatment is more favourable for furnished in most scenarios, but the management is slightly more involved – you need to provide a minimum list of furniture and equipment defined by law.
The Costs You Need to Factor In
Personal name (unfurnished): No setup costs. Basic tax declaration. You can manage the accounting yourself if the amounts are small.
LMNP: No setup costs beyond registering with the greffe (free, or minimal fees). Accountant for régime réel : €500–€800/year. Optional CFE (cotisation foncière des entreprises) – a small business tax that varies by municipality, often between €200 and €600.
SCI: Setup costs of €500 to €1,500 (drafting articles, registration, legal announcements). Annual accounting : €800 to €2,000 depending on complexity. Annual legal formalities. If you change anything – new partner, capital increase, address change – more legal fees.
The SCI clearly costs more to run. That cost is only justified if the tax savings or structural advantages outweigh it.
So Which One Should You Choose ?
There’s no universal answer, but here’s a practical framework.
Choose LMNP if : you’re investing alone or as a couple, buying one or two furnished properties, want maximum tax efficiency with minimum hassle, and plan to hold the property long-term.
Choose SCI (IR) if : you’re buying with family members or partners, succession planning is a priority, and you’re renting unfurnished.
Choose SCI (IS) if : you’re building a portfolio, want to reinvest profits at a lower rate, and accept the trade-off on capital gains at exit.
Stick with personal name (unfurnished) if : you want absolute simplicity, your rental income is modest, and you’re in a low tax bracket where the impact is manageable.
One last thing – and I think this matters more than people realise – talk to an accountant before you buy. Not after. The structure needs to be in place before the purchase. You can’t buy in your personal name and then “switch” to an SCI later without selling the property to the company, which triggers notary fees and possibly capital gains tax. The decision is hard to reverse, so get it right from the start.