Risk of Somebody else Starting a Business in Your Name

Start a Business

I was recently asked: Should I let somebody put their business in my name? A further catch, was that the third party who wanted to use another’s name to set up a business was a family member with a failed business with negative financial information and ratings.

Should you accept the Risk of Somebody Else Starting a Business in Your Name?

Do not let somebody else start a business or put their venture in your name. At the outset, and as harsh as this may sound, there is probably a reason why that other person’s current business has lawsuits and debts against it… Whether that situation came about as a result of bad luck, bad management or a combination, you would be very exposed in your personal finances if you allow them to put the new business in your name. The situation does vary depending on the country in which you are based, but the general rule is that if the business is in your name, then you can be held personally liable for all debts. If the new business was to fail, even if due to bad luck rather than bad management, it would put your personal financial standing at great risk. Assets that you might own, like a car or house, or even financial holdings like shares, could be attached and sold to defray the debts of the business (obviously there is a legal process involved). You would probably not be able to defend the case on the basis that you “fronted” for somebody else!

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