My dad wants to open a Ltd company in my name and buy land?

My dad wants to open a Ltd company in my name and buy land?

10:48 AM, 27th January 2022, About 4 months ago 5

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My dad wants to create a limited company under mine and my brother’s name and then buy land with it. He plans on building something commercial and might take out a loan.

He said he would put the land and company under mine and my brother’s name. This is just in the discussion phase, and we’re all adults, but since we’re still young this would be an investment.

I’m worried about the legal ramifications of this. What if something goes wrong, will me and my brother be held responsible even though we aren’t part of the process, it’s just under our name?

What if my dad takes out a loan and something happens, will the debt be passed down to me and my brother?

If something goes wrong with the commercial building, will me and my brother be held responsible?

Many thanks

Fatimah



Comments

by Graham Bowcock

11:12 AM, 27th January 2022, About 4 months ago

It definitely sounds risky.

If you and your brother are to be shareholders in the company then, obviously, it is your company, but crucially you will be responsible for the actions of that company. If your father is not a shareholder then he should not be able to act for the company, unless given express authority to do so. This should not extend to agreeing loans for the company.

Most loans of any size will require the shareholders/directors to give Personal Guarantees.

It's not clear what you are all trying to achieve here, but it definitely wnats approaching cautiously.

by Simon Lever

11:34 AM, 27th January 2022, About 4 months ago

Hello Fatimah
It depends what your father means by putting the company in your brother and your name.
If he is going to create a limited company and you and your brother will receive shares then your responsibilities and liabilities are minimal. Owning shares limits your liabilities to the amount you have paid for the shares. Hence the name limited company. If you consider the shareholders of Debenhams had nothing to pay when the business collapsed you would be in a similar position.
However if you and/or your brother take an active role in running the company, and in particular you become directors of the company, then the responsibilities increase and you could end up being held liable if the company fails.
Companies House has a page dedicated to what it means to be a director (with a nice little video!) http://www.gov.uk/guidance/being-a-company-director
However this does not give an explanation about some of the downsides and an indication of the potential penalties can be found on this site: https://www.lawdonut.co.uk/business/business-ownership-and-management/the-board-of-directors/directors-responsibilities (Section 5).
It should not be possible for your father to involve you without your permission but in families the information required to accept appointments is generally known and you can be bypassed.
If a company is formed then you may consider using alphabet shares to be able to extract profits at different rates and to move value between generations. See Mark Alexander’s tax planning for more details.

by MICHAEL REGAN

11:39 AM, 27th January 2022, About 4 months ago

Reply to the comment left by Simon Lever at 27/01/2022 - 11:34
Sound advice

by Blodwyn

11:46 AM, 27th January 2022, About 4 months ago

Query conflict of interest?
You need to be separately represented.
If everything goes wrong and if it is a properly constituted Limited Company, your personal risk is your own investment and any guarantees you may have given, such as a charge to the bank over your own home.
Your personal credit score is at risk.

by LythamLee

12:19 PM, 31st January 2022, About 4 months ago

Reply to the comment left by Graham Bowcock at 27/01/2022 - 11:12
"If you and your brother are to be shareholders in the company then, obviously, it is your company, but crucially you will be responsible for the actions of that company".
WRONG!!!!!


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