Buying Real Estate in holding company with minors...Need advice please! - Page 2
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Thread: Buying Real Estate in holding company with minors...Need advice please!

  1. #11
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    When it comes to liability, the plaintiff's lawyer will go down to corporate records and pull the owners and directors of the company they are suing. They will then list the owners and directors as part of their lawsuit. If you are found liable, they can then seize any assets of any of those listed, so your plan of a holdco to protect you won't actually work. It will also expose your children to the liability as I said before.

    I've got a buddy who's going through a company lawsuit right now and found out he's not protected at all by the corporate wall.

    Again, 20-30k to your oldest, especially if he gets education tax deductions, could be paid as income and probably come tax free. If you pay dividends, each child would have to have different class shares, otherwise you have to pay dividends to all. You issue dividends on a class of shares, not on an individual holding shares. Everyone holding the same class, must get the same dividends/share.

    As for making it an operating company, there are criteria that have to be met...flipping 1-2 houses a year may not qualify it as operating...I'm not a flipper, so I don't know what the criteria is.

    From a finance state, starting a new company every few years means you start from scratch with the banks, CRA, etc. This can cause you problems where a track record could be an advantage...

    I'm not JustAGuy (without spaces), or Donald, or <insert name here>.

  2. #12
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    Quote Originally Posted by Just a Guy View Post
    When it comes to liability, the plaintiff's lawyer will go down to corporate records and pull the owners and directors of the company they are suing. They will then list the owners and directors as part of their lawsuit. If you are found liable, they can then seize any assets of any of those listed, so your plan of a holdco to protect you won't actually work. It will also expose your children to the liability as I said before.
    What the HOLDCO protects is your personal assets. Any assets the HOLDCO owns at the time of the lawsuit are up for grabs. So although the corp owners are implicated, they are simply representing the HOLDCO. The plantiff cannot put a lien on your personal home for example. They can only touch assets in the HOLDCO's name - unless the judgement determines you acted maliciously. If you commit fraud, no one is protected.

  3. #13
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    If it's a personal injury suit, you can be found liable as my buddy found out. Someone slips and falls outside your flip, you could be at risk especially if you have insurance...lawyers love going after insurance and judges have no issues compensating people because it's insurance money...

    They'll list every person they can think of in a lawsuit. Not sure if they'll win, as they have to prove liability, but he was named as a director. Worst part is, if the holdco declares bankruptcy he would still be liable for the entire judgement according to his lawyer. The judgement is usually rendered against everyone, if one doesn't pay, the remainder pay more.

    P.S. I've already had this arguement with muska in a different thread. He claims to be a lawyer and, while he initially said the same thing, when I explained my buddy's case, he later admitted it can happen in a personal injury case.
    Last edited by Just a Guy; 2017-03-17 at 12:34 PM.
    I'm not JustAGuy (without spaces), or Donald, or <insert name here>.

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  5. #14
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    ^^^ thats because he has insurance.
    No insurance, he can only go after the corp.

  6. #15
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    No, they can go after everyone and they will...without insurance means bankruptcy and the loss of personal assets beyond a limit. If the guy has assets, they'll go after them and anyone else.
    I'm not JustAGuy (without spaces), or Donald, or <insert name here>.

  7. #16
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    You guys sure? So what's the point of having a corp if they can come after you personally? I have read many books and spoken to many people and they all tell me corp protects you. I am not sure about personal injury though

  8. #17
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    Plaza, I have yet to see good reasons expressed for going to this much trouble just to own a few properties. I'm sure the lawyers and accountants will be willing to help with whatever complex scheme you feel inclined to undertake, but IMO this is overkill.

  9. #18
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    Not sure about the rest of Canada, but in Quebec we have Hidden defects (vice cachee) lawsuits. Basically the person I sell a house to finds an issue years down the line to his house. He can come back and sue me and ask me to repair it. They have to prove that I knew about it and tried to hide it, but from what I hear, many lawyers specialize in this thing and still try and you have to spend 30-50k to defend yourself.

    So by setting up a corp, investors protect themselves to this stuff since we have no idea on the history of the building. Also the fact that I buy repos from the bank and that is sold as is, there is no one I can go after.

    this is the main reason of setting up the corp and then some tax benefits like 20% tax as opposed to 40-50% personal since it's active income and not capital gains

  10. #19
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    The hidden defect civil code in QC is indeed a pain for sellers. The way most people protect themselves is by selling with no legal warranty. Since you are already buying without one (bank repos are always sold without legal warranty) then you have good reason to sell without one as well.

    If that's your main concern, I would still not go through the hassle of having the corps set-up. Waiving the legal warranty is enough protection.

  11. #20
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    Quote Originally Posted by Just a Guy View Post
    P.S. I've already had this arguement with muska in a different thread. He claims to be a lawyer and, while he initially said the same thing, when I explained my buddy's case, he later admitted it can happen in a personal injury case.
    Here I am, still shamelessly claiming to be a lawyer. For anyone who would like to tune in on that previous thread where JAG thoroughly kicked my butt, forcing me to "later admit" that he was right, here it is:

    http://canadianmoneyforum.com/showth...y-Now-or-Later

    I have gone back and re-read that thread. Call it wilful blindness, but I cannot see that I admitted much apart from saying that some circumstances can be imagined where a corporate principal can be held liable in a personal injury case. I never said otherwise. These things are always fact-driven and possible scenarios are endless. But I remain firmly of the view that the concept of the limited liability corporation remains alive and well and it can offer protection against all manner of personal liability.

    It is also the case that I remain of the view that JAG is dead wrong when he says

    Quote Originally Posted by Just a Guy View Post
    the plaintiff's lawyer will go down to corporate records and pull the owners and directors of the company they are suing. They will then list the owners and directors as part of their lawsuit.
    First off, going off to the company registry should be a job for an articled student. A lawyer's time is too valuable to be wasted on registry searches. Anyway, it's all available to lawyers online these days. As I said before:

    Quote Originally Posted by Mukhang pera View Post
    True, in some tort cases, where it is not clear at first blush where fault lies, some "shotgun" pleading might be called for. But the notion of keeping in the action to the end of trial every possible defendant is not a course responsible counsel would undertake. It will greatly protract the proceedings, drive up costs and, in the end, someone must bear those costs. I would not want to be the one explaining to my client just why it is that he is on the hook for the costs of a conga line of successful defendants. Moreover, if the court finds the action should never have been brought or maintained against some defendants, the award of costs might be punitive indeed, such as an award of "special costs" or "solicitor client" costs, etc.
    Again, I'll support my views with a few cases. Below I offer a few B.C. case citations. Each follows a line or two stating what may be drawn from the case as far as corporate principal liability goes and how often corporate principals are or are not sued. JAG says it's always. I say BS. JAG also says where there is insurance, the plaintiff always wins. Nonsense.

    1. Occupiers' liability, franchise restaurant, franchisee and franchisor companies sued; no personal defendants sued.

    http://www.courts.gov.bc.ca/jdb-txt/...15BCSC2310.htm

    2. Personal injury action against small hotel owner. No personal defendants sued. Action dismissed even though we can be pretty sure there was insurance.

    http://www.courts.gov.bc.ca/jdb-txt/...17BCSC0274.htm

    3. Personal injury action against small bakery. Only the company sued. Defendant company found 25% at fault at trial. On appeal, court finding clumsy plaintiff wholly at fault. No liability found against company, even though insurance was likely in place.

    http://www.courts.gov.bc.ca/jdb-txt/...13BCSC0889.htm

    4. Personal injury action against corporate owner of a small commercial building rented to tenants. Principals of the company not sued but one “personal defendant” was sued because she was a tenant of the premises, operating a business as a proprietor, not using a corporation. On plaintiff’s appeal, court finding landowner not an “occupier” under Occupiers Liability Act, s. 1(b), and agreeing tenant was not negligent. Action dismissed even though there was most likely insurance in the background.

    http://www.courts.gov.bc.ca/jdb-txt/...12BCCA0108.htm

    5. Next comes a personal injury case against a company operating a beauty shop. Again, company owners/directors/shareholders/ friends and relatives of same were not sued. However, the shop employee said to have been at fault was sued. This is normal in personal injury litigation. Where an individual is identified as being the causative agent, it is prudent to name them as defendant, on the principle that a tortfeasor is always liable for his own tort.

    http://www.courts.gov.bc.ca/jdb-txt/...11BCSC1690.htm

    That could well apply to JAG’s buddy for all we know. There might be facts that suggest personal fault on his part.


    6. Next is an unsuccessful personal injury action against Canada Safeway. I’ll bet Safeway carries insurance, so why did the trial judge not nail them? Why did the appeal court uphold the trial judge? Imbeciles! On top of that, why did the plaintiff's lawyer not run down to the registry (even if living in a different town from said registry...always fun to bill for travel) and do a company search and sue officers and directors, etc. of Safeway?

    http://www.courts.gov.bc.ca/jdb-txt/...11BCCA0202.htm

    Oh, now I remember. JAG gave me a stern rebuke in the previous thread for mentioning a suit against the principals of Walmart:

    Quote Originally Posted by Just a Guy View Post
    Mukhang,

    First off don't compare a Walmart shareholder to a single guy, who owns a company and is also the sole (or co-owner with family) the two are not the same by any means.
    So it must be that when a corporation gets to be of a certain size or notoriety, that its principals gain shelter from personal injury lawsuits. I would ask JAG to expound in this thread at just where that point of non-liability begins. What size company? Size determined by # of shareholders, gross revenues, or what exactly?

    I must also remember that JAG is able to draw on the considerable legal training he has received as a result of talking to his friend. I, on the other hand, am not talking of real word events. As JAG says:


    Quote Originally Posted by Just a Guy View Post
    You may be up on what's happening on the theory, but I'm watching it happen in real life.
    So the court decisions I have cited, do not involve real lawsuits against real people. They are theoretical musings only. And, unlike JAG's pal, while the cited lawsuits would appear to have come to an actual conclusion, those conclusions are really conclusions in theory only. Now JAG's friend is, we are told, in for long years of torture before his case gets dragged across the finish line. By that time, no current CMF member will still be alive. Nor will JAG's pal. His grandchildren will inherit and perhaps see the denouement of the whole debacle.


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