Buying in house in Ltd Co - asset protection

steampowered

I don't see how putting your house into the name of a limited company would help shield your house from creditors.

If you are made bankrupt, the official receiver will sell your assets to pay your creditors. If you are a shareholder, the shares in that company will be part of your assets!

Contracting through a company, liability insurance and getting clients to agree T&Cs with a limitation of liability provision are better ways of protecting yourself.

AdrianC

Peterjones2018 wrote: »

So if the house was worth £100k, then the Ltd Co that owned it would be valued at £100k I guess? I'd be the only share holder, so would my shares automatically be valued at £100k? I guess they would, because that's what the company balance sheet would show.

Pretty much, yes.

And if you were in a position where your house would be lost to pay for a negligence claim, then your share(s) in the limited company would similarly be vulnerable.

I don't know a lot about Ltd Companies, but I have seen people set them up and usually have one share for £1000. Presumably, this figure becomes meaningless, once the company purchases assets?

That's a grand in fees to set it up. For that, you get a piece of paper and some legal responsibilities. Nothing else. Oh, wait. You get an entry on the Companies House website...

ACG

If you put the house in the name of the limited company, every year you have to file accounts. You would have to pay CGT when it comes to selling it.

You would also potentially have to pay CGT if you sell it to the company and/or stamp duty when you sell it to the company.

Also, if you personally get sued they could come after your assets - the shares of the company would be assets.

Lastly, if you have a Mortgage or need a Mortgage, that will kill it in its tracks.

It is far easier and better to make the company limited. There is a reason why people make their company limited and not their home.

Annie35

Oh here's another one, if you go bankrupt you can't be a director in a Ltd anyway

PeterJones2018

00ec25 wrote: »

then go away and talk to someone who does know what they are talking about because this whole thread is utter tosh

1. personal service companies are, quite rightly, being reined in because they are indeed often (but not always) disguised employment. In the context of the public sector some instances are also morally reprehensible given the tax advantages for the PSC boss compared to the position of the low paid workers still employed by the public sector, but managed by "the boss".

2. I don't expect you to be able to get up to speed based only on internet reading, so pay a professional (employment solicitor would be ideal) to explain to you what "IR35" means and its implications for a PSC

3. in what way are the shares in a "close company" not part of the assets of the person you wish to sue hmmm?

4. Stop trying to fly to the moon before you have even invented wings. Go back to basics and find out how the UK works, THIS IS NOT AMERICA, and take a lesson in reality, not flights of inventive fancy.

In my opinion the purpose of an internet forum is to share information, knowledge and experience with others. I am trying to find out more about a topic that is new to me, by doing my research online, prior to speaking to someone who is a subject matter expert. As part of that background research I found numerous examples of "asset protection", as I described. Can you explain how asking others for their opinions on such matters constitutes a "thread that is absolute tosh"?

1. I agree about PSC. I did not invent such a concept. I was perfectly happy working on payroll with a decent contract of employment. That contract ended and I was required to work with employment agencies, who prefer to use "workers" who are "contractors" because it reduces THEIR liabilities and NI costs. Prior to 2016, end users (including public sector) also REQUESTED "self employed" contractors, as it removed THEIR liabilities (wrt maternity, sick leave, NI, unfair dismissal etc).

2. I have learnt about IR35. But this thread was more related to asset protection against litigation, rather than reducing tax. The tax situation is related only by virtue of the previous benefits of limited company contracting. Now the situation has changed regarding tax benefits for working via limited company, but as far as I am aware, the limited litigation liability has not changed. But end users are now less keen to engage with limited company / PSC, hence the return to personal employment.

3. Very good point. This is one of the reasons I am curious as to what the benefits of such a set up would be, wrt asset protection?

4. Agreed, this is not the U.S. A point I specifically mentioned in my original post. Now my question would be, Is this a suitable strategy in the USA? Because it's being promoted there (as far as I can tell online). So either it is appropriate in the U.S., but not the UK (and if so, why?) Or, it's not suitable in either country. In which case it's another "Family Protection Trust" waste of money venture.

PeterJones2018

AdrianC wrote: »

Pretty much, yes.

And if you were in a position where your house would be lost to pay for a negligence claim, then your share(s) in the limited company would similarly be vulnerable.


That's a grand in fees to set it up. For that, you get a piece of paper and some legal responsibilities. Nothing else. Oh, wait. You get an entry on the Companies House website...

Yes, shares owned would also be at risk. The way I've seen this marketed is that the director of the company gets sued, but the limited liability rules prevent the creditors gaining access to all the assets of the limited company. i.e. the director owns a share worth say £1, but the company has assets worth £100k. So the creditors can only seize the director's shares, worth £1.

So I guess the question is, can a director own a share in a limited company worth only £1, if the company's true value is £100k?


I thought the £1000 shares were money put into the company at set up. That's what I've seen on Companies House documents (of other people's limited companies).

PeterJones2018

steampowered wrote: »

I don't see how putting your house into the name of a limited company would help shield your house from creditors.

If you are made bankrupt, the official receiver will sell your assets to pay your creditors. If you are a shareholder, the shares in that company will be part of your assets!

Contracting through a company, liability insurance and getting clients to agree T&Cs with a limitation of liability provision are better ways of protecting yourself.

I think the concept involves the director's shares only being worth a nominal amount. The rest of the assets are owned by "the company". The director has a right to live in the house and maybe pays rent to "the company".

I have indemnity insurance (it's compulsory now).
Asking my "clients" to agree to any "terms of service" would be impossible.

PeterJones2018

Annie35 wrote: »

Oh here's another one, if you go bankrupt you can't be a director in a Ltd anyway

I think the concept involves setting up the limited company, prior to any litigation commencing. It's a defensive strategy. Yes, you would be bankrupted by the litigation, but the property would be out of reach of the litigants, as it belongs to a limited company, not you the one being sued.

Obviously, you would have to resign as a director, following the lawsuit. But you'd still have access to your house. That's the theory anyway.

I'm not wholly convinced by this strategy. But it's being marketed and advocated, so I thought I would find out other people's opinions.

PeterJones2018

I tried posting links, but can't.

Just to reiterate, I am not advocating this or saying it's a good idea.
I'm just asking advice on something I (as a "consumer") am seeing marketed to me.

Google or YouTube "asset protection" and you will see so many videos and advisors etc.

davidmcn

Peterjones2018 wrote: »

I think the concept involves the director's shares only being worth a nominal amount. The rest of the assets are owned by "the company".

Which is owned by the shareholders. This plan only works if somebody other than you owns the company.

I suppose the most common form of "asset protection" is to live in a property owned by your spouse (assuming they're in a less risky business than you!). But this is usually only a concern in the context of "normal" business failures. If you're only concerned about people suing you for negligence, and you're insured for that, then I'm not sure why you're contemplating complex protection schemes.