The Owner Buy-Out (OBO): A Strategic and Professional Asset Management Tool

A mechanism for monetizing and optimizing assets

Owner Buy-Out (OBO) is a wealth strategy that allows an owner of assets, whether real estate or professional, to monetize their assets without losing control. This mechanism is particularly popular with investors and entrepreneurs who want to secure and optimize their assets while benefiting from an advantageous fiscal framework.

OBO is based on a simple principle: the owner sells his property to a company he controls, generally an SCI (Société Civile Immobilière) or a holding company, financed by a loan. This operation frees up liquidity, while maintaining asset management. It is thus an alternative to pure and simple transfer and is part of a strategy of tax optimization and asset transmission.

OBO Immobilier: principle and implementation

How OBO real estate works

Real estate OBO is based on a structured scheme. An individual owner of a property decides to sell it to an SCI that he controls. This SCI finance the acquisition with a bank loan, reimbursed thanks to the rents generated by the property.

Take the example of Madame and Mr. Durand, owners of a significant real estate portfolio. Wishing to diversify their investments without permanently selling their property, they created a low-capital SCI and transferred part of their real estate assets to it. In return, they receive cash from the sale, which can be reinvested in other assets, such as life insurance or other wealth projects.

The advantages of OBO real estate

OBO offers several tax advantages. The loan interests incurred by SCI to finance the acquisition of the goods are deductible from partners' property income, making it possible to reduce the tax base and therefore the overall tax burden.

To optimize the transmission, the shares of the SCI can be dismembered and gradually allocated to the children as bare property. Since the value of SCI's shares is low due to the bank loan, the transfer taxes applicable to this donation will be lower. It will also be possible to benefit from the 100,000 euros allowance every 15 years, ensuring the transfer of real estate to children duty-free.

However, this device must be put in place with care. The sale of the property to the SCI leads to the loss of the 30% reduction applicable to the main residence under the Real Estate Wealth Tax (IFI), as confirmed by the Constitutional Council in a decision on the ISF. In addition, loan interest is not deductible from the IFI base.

Professional OBO: a system for business takeover and optimization

The OBO mechanism in business

In a professional context, OBO allows an entrepreneur to transfer his business to himself via a takeover holding company. This operation is particularly relevant to optimize taxation and prepare for transfer.

The entrepreneur brings his business or his shares to a holding company that he controls. The latter finances the acquisition by a bank loan, repaid thanks to the results of the target company.

The advantages of professional OBO

One of the main advantages of professional OBO lies in optimizing cash flow. The operation makes it possible to obtain immediate liquidity, which can be reinvested in other professional or asset projects. In addition, the loan interests incurred by the holding company are tax deductible, which reduces taxation on profits.

In addition, the use of debt can make it possible toOptimizing corporate tax and to use the holding as a real long-term investment vehicle.

Professional OBO is particularly suited to liberal professions. It can take the form of a contribution from the liberal fund or shares of an operating company to a Société de Participations Financières de Professions Libérales (SPFPL). This structure allows a professional to organize his activity and its transfer in a progressive and fiscally advantageous manner.

Pitfalls to avoid and best practices

Fiscal and legal risks

While OBO is a powerful lever for asset and fiscal optimization, several precautions must be taken. An operation deemed abusive can be reclassified by the tax authorities by abuse of rights or mini-abuse of rights, leading to sanctions and remedies. It is therefore crucial to avoid any objective exclusively as well as mainly fiscal.

Thus, the operation consisting in selling one's main residence to an SCI controlled by the taxpayer who has become a tenant of this building, for the sole purpose of being able to charge any land deficit relating to it from his income is to be avoided, since case law has characterized this operation as an abuse of law and is very severe.

The transfer price must be set consistently. A price that is too low could be interpreted as a fraudulent maneuver and call into question the validity of the transaction. Likewise, the management of the company must be sound. The SCI or the holding company must not be structurally loss-making, which could reveal an artificial arrangement.

It is also essential to guarantee real financial autonomy of the structure, in particular by ensuring the effective payment of the rents or the income generated.

A wealth structuring tool to master

Real estate and professional OBO is a real lever for asset optimization. It makes it possible to secure your assets, reduce taxation and prepare for an effective transfer. However, it requires rigorous implementation to avoid the risks of requalification.

Are you considering an OBO to structure your assets or optimize the transfer of your business? Get help from a notary or a specialized lawyer to secure your transaction. Contact our study for a personalized analysis and maximize the opportunities offered by this device.

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