Using Your Personal Name Vs A Limited Corp In Business Contracts

In the complex world of construction law, the details matter—especially when it comes to how you identify your business in contracts. At FH&P Lawyers, our Construction Law Group recently handled a case that highlights the critical importance of clearly disclosing your business as a limited liability company. Failing to do so can expose you to significant risks, including personal liability that could threaten your assets. In this podcast, Clay, Tanvir and Shane will dive into the details of this case, explore the legal nuances, and provide insights on how to protect yourself and your business in similar situations.

Clay: Welcome to another edition of FH&P Lawyers Law Talk. I'm Clay Williams, I'm a Partner at FH&P Lawyers and with me is Tanvir Gill, who's just back from mat. leave. Welcome back!

Tanvir: Thank you, but was I really ever gone?

Clay: Well, you know what? We missed you terribly, so I'm glad to see you back!

Also with me is Shane Garder, an associate who's been almost a regular on this show, so welcome, Shane! We've got a really interesting show for you today.

We're trying to push that we've got a Construction Law Group at FH&P Lawyers and some of the cases that we've done and Shane's done are really interesting one. Now, the theme of this show is “What happens if you are operating as a company but you don't disclose that in your contracts” and Shane's just had a really interesting case about that.

Shane: Yeah, so it was in the context of a residential development project. The scope of work was largely related to a retaining wall. It was a fairly standard case. Our client engaged the builder, they claimed that the work was deficient, the retaining wall was falling over, as alleges in the notice of a civil claim, and ultimately they're unable to resolve their dispute, as it happens, especially in today's construction industry, and they ultimately filed a claim in the BC Supreme Court.

So after they filed a claim the defence council to the opposing party came back and said "Well, actually, you named the wrong party, you named the person or the builder individually, and you didn't name the numbered company that he was operating under," and we said, "Well, how are we supposed to know? It's in none of the materials that he's a numbered company" and the dispute sort of arose from there.

Clay: I guess I want to pause there and just talk about the consequences of this because this was a numbered company that had nothing (no assets), so if you were to pursue the litigation and win against the numbered company, you'd have nothing. You get a dry judgment.

Shane: And people do that on purpose, right? I mean, everyone has a little bit of fear in there about dealing with the shell company, so the way the legislation is set up is there are certain requirements that you have to satisfy in order to avail yourself of that limited liability protection at a numbered company of sorts, and one of those is identifying yourself in your advertising,

Clay: and not just a numbered but any company.

Tanvir: If you look at us for example, we have certain lawyers who are partners of our firm, and when they are emailing their clients, it says "Providing a service as a law corporation" in the email. So that's your way, as a client when you're speaking to a lawyer, knowing that you're dealing with somebody that's incorporated.

Shane: Yeah, and I've noticed it since the case, as you notice it more often now. Even if you're looking at realty signage, you'll see "Operating as a professional Corporation." You know, you see the LLP, the Inc., and I think people sort of take it for granted. It's more important than you think it would be, and without it, I think you open yourself up to the risk of liability.

So going back to the case after litigation ensued we did an application to amend our notice of civil claim to add the numbered company, admit an abundance of caution, basically saying “Look, if it isn't the individual who we contracted with, it was the numbered company posing council”. Quite astutely I probably would have done the same thing; brought an application to try and remove this guy individually from the notice of civil claim and we had a hearing. The result of which was they found that we were allowed to amend the claim in favour of our client.

They also dismissed the opposition's application to strike and to dismiss the claim on the basis that there wasn't enough evidence that, at the time of entering into the contract, they properly identified themselves as operating under limited liability as required under the Business Corporations Act.

Clay: Okay, now I just want to go back and backfill a little bit of the facts there. So, you know one of the things that happened in your case was that the person identified as a trade name, is that right?

Shane: Yeah

Clay: So you know, they came in and said just "We are ACME Builders" and without an LTD, without a Inc., without anything to identify that it's a limited company. So who the heck does that? And so you know, that's when Shane's client decided, Well, I guess I'm just dealing with a person here because it's not a company. So there was an interesting twist on that one, though, with the registration.

Shane: Yeah, so actually in that case as Clay pointed out, the numbered company was registered as a Sole Proprietorship that was operating underneath a business name and in the person's business cards they had the business name in there.

So for example, you could say, well, I'm Shane Matthew Gardner, A Lawyer, so I'm going to operate as SMG law, and I have that in my business card, and the question is, well, is that enough? Does that really allow the public to know that you're a limited liability company or you're operating as someone other than yourself? And the case law, it's pretty interesting, there's a bit of a dearth on it, there's nothing really too finite on it or too direct, especially in cases such as this where you had an oral contract, but ultimately when you look at the legislation and the way the legislature designed those specific provisions, it's really about protecting the public.

I mean limited liability protection is such a powerful tool to hold back your personal assets, they make an obligation or an own asset in order to avail yourself of that protection, you have to let the public know, "Well I'm operating as someone different, and that someone is or may be a corporation, and they might not have the same assets you might think I have”. So you better make it known to them ahead of time, otherwise a court could find, well if you didn't, despite the fact that you are operating as that numbered company, we're still going to find you personally liable.

Clay: And that's exactly the point that I think we should make sure our listeners understand is,

“You've got to identify yourself as a limited company at the time the contract is made.”

It's not enough, and we see this all the time when ACME Builders enters into a contract and then later on, it's ACME Builder LTD, right, and what is the risk of that? You can lose your house. You completely might lose the advantage of limited liability.

Tanvir: I think one part is a lot of people think they can self-incorporate or they can have a DBA and do business as a certain name, but they don't actually understand the structure they don't understand the difference between being Incorporated, a limited liability company, and operating as a full proprietor and how and where your personal assets are going to be up for grabs if something happens. So, if you're not sure of what your structure is, how you've incorporated or how you should be presenting your business, you need to call a lawyer.

Clay: You know, and I think some people think they can trick you, you know, they think, okay, Well, If I just use ACME Builders, then he doesn't really know who it is but if you've actually got a limited company that's the last thing you should be doing. You should be putting that out there, putting it on your truck, putting it on your contracts and taking advantage of the very powerful tool of limited liability.

Shane: There's a case we relied on, a recent decision from the Supreme Court 2024 where I was dealing with a PREC, from a residential realty perspective where the realtor had entered into a few side contracts and he ultimately argued, well listen although it's my name, very clearly I'm operating underneath my Professional Real Estate Corporation and it's not me as the individual and the court said well no, even though the name of the company is somewhat different than our case, is synonymous with you, the individual.

You haven't identified yourself with that suffix or prefix of saying, well no I'm a limited liability company, but they're saying no, we're going to hold you personally liable despite the fact that it might be a few letters away. I mean the importance is still there. I think everyone incorporates to protect their personal assets. The biggest takeaway here is that if you don't follow through with the other requirements I mean the buck doesn't really stop there, you might not get the protection that you paid for.

Clay: So the takeaway here is, think about the Contracting; how you contract with people. And some of our clients do it via text with a quote, they send a quote out, and they say yes proceed or they send an email, it doesn't have to be really too complicated but it sure better designate the fact that you're a limited company. All right, thanks! See you next time!

Questions? We're ready to help. Please contact Clay Williams or Tanvir Gill, or any of the team at FH&P Lawyers.

Disclaimer: This material is provided for informational purposes only and should not be construed as legal advice on any subject matter. Consult with a qualified lawyer for advice on specific legal issues.