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My 28 year old son agreed to put his fathers business in his

My 28 year old son...
My 28 year old son agreed to put his father's business in his name as his father had recently claimed bankrupcy. Now it seems to have caused some problems and my son wants out.
I feel that he was taken advantage of as he is a slow learner and I don't feel that he fully understood the consequences. He has trouble grasping abstract situations and will agree to most anything if he thinks it will help someone. Unfortunately he did not seek legal advice prior to signing.

Is there anything we can do to get this business out of his name so he doesn't end up having to claim bankrupcy himself if the business fails?
Thank you,
Kathy Lane
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Answered in 1 minute by:
8/31/2013
Debra
Debra, Lawyer
Category: Canada Law
Satisfied Customers: 102,522
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Thank you for your question.

Before I begin I want to explain a bit about how the site works.

It may be that I will find that I need to gather further information from you. As well, it's quite possible that you may feel the need to ask me additional questions for further clarification.Please do not worry that you will be charged additionally if I ask you questions or if you need to ask me questions. That is not at all how the site works.

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Is there a corporation?
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Customer reply replied 4 years ago

I'm not sure if it's a corporation.

If there is a corporation then your son would not be personally liable regardless of what happens unless he signed something to guarantee a debt or contract personally.

If there is no corporation then anything he signed, such as for leased equipment, is going to bind him for the length of the contract.

So if there is no corporation it's not about taking his name off the business as the business is not a separate legal entity. It's about not signing anything more, not buying things if they cannot be paid for etc.

Do you see what I mean?
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Customer reply replied 4 years ago


He did register his name as the owner of the company so does that make it a corporation? The bank account is also in my son's name.

That does not make it an corporation and it sounds like it's not actually.

So I suggest that your son stop signing anything, stop buying anything or doing anything further in his name.

But there is no business that is separate. Right now it's all him and so going forward he will have to tell his father he won't borrow or contract further, at all.
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Customer reply replied 4 years ago


I'm not sure I do see what you mean...


So even if my son's name is XXXXX XXXXX paperwork as being the owner, he isn't liable for anything going on there?


He has never signed for equipment, although his dad did recently purchase some large equipment, he didn't ask for a signature from my son.


At this point, his dad is asking him to change the address on the bank statements so they will go straight to him. Also to put his bookkeeper on the account so she can access it.


Now I'm afraid that he shouldn't do these things...what do you suggest?

He is liable for anything in his name.

He is liable for any debts or contracts in his name.

But if there is no corporation then whomever signs for something is liable because the business is not a legal entity.

If there is a corporation then the corporation is liable and your son would not be personally liable.
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Customer reply replied 4 years ago


Basically then any debts incurred after he took ownership are not his responsibility unless he actually signed for it himself?


What are the implications if his father signed for capital expenses as his son?


 


 

If the father signed your son's name then that's fraud and your son will not be liable.

It doesn't matter who owns the business. The business is not a separate legal entity unless it's incorporated so any debts or liabilities are personal and depends on who agreed or signed etc.
Debra
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