Buying in house in Ltd Co - asset protection

PeterJones2018

davidmcn wrote: »

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.

I'm curious about these schemes because I've seen them advertised online. I became curious as to why they may work in the USA, but not the UK. I've always just relied on indemnity insurance, but I'm never completely convinced that insurance companies won't try and find a way of avoiding a pay out (e.g. negligent manslaughter, "criminal" act, recent case involving a surgeon, where insurers refused to pay out).

Finding out more and asking others can never be a bad thing, in my experience.

Slithery

Peterjones2018 wrote: »

I became curious as to why they may work in the USA, but not the UK.

Obviously because the two countries have completely different laws and legal systems.

davidmcn

Slithery wrote: »

Obviously because the two countries have completely different laws and legal systems.

Indeed its often a waste of time trying to transpose foreign advice into UK structures.

OP, are these American products even being marketed at people in the same position as yourself ie self-employed but worried about being sued for negligence?

AdrianC

Peterjones2018 wrote: »

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?

Don't get the nominal par value of a share confused with the actual market capitalisation of the company.

Take a typical PLC's share. Let's say IAG - International Airl ines Group, BA's parent. The nominal value of a share is €0.50. They're currently trading at £6.32.A PLC is simply easier to determine the value of a share than a private limited company, because there's an open market. All it means is that the share was sold for €0.50 (nominally) when the company was founded. But, of course, share (re-sale) prices rise and fall with the fortunes of the company.

If somebody takes that "£1 share" in lieu of a debt, they own the company that owns the house. They own the house... If you're living there, that doesn't directly change anything for you - you are still a tenant of 14 Acacia Avenue Ltd. Your landlord has not even changed. That actually makes it easier for a trustee in bankruptcy to say "Yep, that's a disposable part of your assets", because it doesn't directly make you homeless.

steampowered

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". 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.

Every company has shares.

A company is owned by its shareholders.

There is no such thing as a company that exists in isolation.

If you want to link us to the US things you've been reading, go ahead and do so. But be careful that it isn't just nonsense (like the 'freeman of the land' tosh people come up with in the UK.

Also remember that the US is not a single country, as far as their laws are concerned. It is a federal state made up of 51 separate states, all of which have their own different laws and legal systems.

PeterJones2018

Slithery wrote: »

Obviously because the two countries have completely different laws and legal systems.

I meant WHICH specific difference in the laws? Being as the UK lacks the homestead exemption of many U.S. states, this would appear to make litigation MORE of a risk in the UK. Yet these plans are more aimed at the U.S..

PeterJones2018

steampowered wrote: »

Every company has shares.

A company is owned by its shareholders.

There is no such thing as a company that exists in isolation.

If you want to link us to the US things you've been reading, go ahead and do so. But be careful that it isn't just nonsense (like the 'freeman of the land' tosh people come up with in the UK.

Also remember that the US is not a single country, as far as their laws are concerned. It is a federal state made up of 51 separate states, all of which have their own different laws and legal systems.

Sorry, this website will not allow me to post a link.
Just put "asset protection" into YouTube.

The main options seem to be trusts and limited companies.

PeterJones2018

AdrianC wrote: »

Don't get the nominal par value of a share confused with the actual market capitalisation of the company.

Take a typical PLC's share. Let's say IAG - International Airl ines Group, BA's parent. The nominal value of a share is €0.50. They're currently trading at £6.32.A PLC is simply easier to determine the value of a share than a private limited company, because there's an open market. All it means is that the share was sold for €0.50 (nominally) when the company was founded. But, of course, share (re-sale) prices rise and fall with the fortunes of the company.

If somebody takes that "£1 share" in lieu of a debt, they own the company that owns the house. They own the house... If you're living there, that doesn't directly change anything for you - you are still a tenant of 14 Acacia Avenue Ltd. Your landlord has not even changed. That actually makes it easier for a trustee in bankruptcy to say "Yep, that's a disposable part of your assets", because it doesn't directly make you homeless.

Thank you.
That makes a lot of sense.
The use of a limited company doesn't seem a great strategy for asset protection. I will need to look into it more. Presumably the laws regarding share capital in the U.S. quite similar, so there must be more to the plan than a simple Ltd Co. set up.
And if you're going to make other people shareholders in the company, then you may as well just divide up, or hand over completely, personal ownership of the house.

PeterJones2018

davidmcn wrote: »

Indeed its often a waste of time trying to transpose foreign advice into UK structures.

OP, are these American products even being marketed at people in the same position as yourself ie self-employed but worried about being sued for negligence?

They seem to be marketed at a range of people, but yes, professionals are specifically mentioned.
It seems there are differences in company law and litigation, but the principles do not seem that different. The main differences seems to be homestead exemption, which if anything would make this plan more appealing to the UK market, rather than the U.S...

PeterJones2018

Thanks for all the comments and advice.
It is an interesting area.

It seems that up until now, the UK has seen more trusts aiming to avoid care fees, whilst the U.S. has both limited company and trust setups aiming for litigation protection.

One prediction I will make is that neither litigation nor care home fees will be going away any time soon, in either country...

For the time being it seems the consensus here is that simple indemnity insurance is sufficient.