Why are you taking over the business?
Is your dad retiring? Is it something that you think you can develop better than he can?
If he is a one off contractor with no assets, then it seems to me that he should probably wind down his business, collect his debts and pay off his creditors.
You can set up a limited company or carry on as a partnership and carry on the same business as he does. You can employ him if you wish. You can employ your dad's employees if you wish.
If you take over his business, you would have to take on his employees which you might not want to.
He can't just hand over his creditors to a limited company or his contracts for that matter. He should pay off his creditors and you can start dealing with the suppliers afresh. The customers may or may not be happy to hand over the contracts to a new company.
As MOB pointed out, you need to get good business advice. A lot of accountants are just not good at this. You need to speak to a good business person or to a good accountant. Change your accountant.
Brendan