Possible Repossession - How Safe Is A Sole Trader?

[Kerrigan]

Would appreciate any input please:

Family member in dire fiancial straits. Lost job in 2009 and has been unable to secure employment since. 15k mortgage arrears and 120k unsecured debt.

They have been avoiding the bankruptcy route and are having one last crack at the whip by starting their own business.

Their parents are funding this new venture.

The new business will be registered as a sole trader as nobody will sign as second director on a limited company.

My question is will the investment money put into this business be safe from the mortgage provider and will machinery be safe from repossession if the mortgage provider seeks legal action?

Thanks.

Kerrigan

 

[Wipetheslate]

No any money or assets are fair game for creditors to go after ,the parents should retain ownership of any machinery or assets of the business as security for their loan , I think a simple agreement with solicitor should do this, I would explore ltd status more , I thought there were new rules on single director companies , not sure .

 

[Kerrigan]

Thanks a million for your feedback.

Will have them look further into the ltd status. If this business fails they will have no option but to go abroad for work so are avoiding this at all costs.

He will be taking out short lease in his name. Is a lease fair game also or something a creditor would not bother with?

 

[Brendan Burgess]

It seems to me that the parents should be the owners of the company and he should be an employee. Probably not even a director.

That way the money they put into the company is totally ringfenced.

It should be a limited company so that if it goes bad, the creditors can't come after the parents.

If it goes well, after a few years he can take ownership of the business. He could probably do some sort of formal option agreement with the parents that h e can buy the shares from them at any time in the future for €100. But you might need tax and legal advice on that.

Brendan