A lasting power of attorney (LPA) is a legal document which gives another person of your choice the ability to make decisions on your behalf. Despite belief to the contrary, a LPA is not only for personal assets. It may also be in the best interest of a business owner to protect themself in the same way.
Shareholders, partners and sole traders are some of the most common business owners who can benefit from appointing an attorney. Should a business owner become incapacitated by injury or illness, would someone be able to take over the running of the business and its finances? If not, fundamental business operations may not be possible. This can have adverse consequences for a business owner’s family finances if they are reliant on income from the business.
The implications of not appointing an attorney may be devastating for any business. In that case, an application would need to be made to the Court of Protection to appoint a deputy. This process could take up to nine months and comes with a financial burden far greater than the cost of putting a LPA in place. During the interim period, the business may suffer with no one in a position to manage its finances and day-to-day operations. Business owners may not be able to rely on family or employees to run the business, as they may not have the legal authority to do so.
When appointing an attorney, it is crucial to choose someone who the business owner trusts and is confident could do the job in the way that they would wish. For this reason, it may be appropriate to appoint two attorneys – one to deal with business affairs e.g an accountant or an employee, and the other for personal finances e.g a family member.
Once in place, the business LPA will allow the attorney to manage the business when needed. It does not affect the owner’s right to continue managing as long as they are able and willing to do so. This type of LPA may also be useful for business owners who travel abroad frequently, as the LPA can also be used while the business owner still has capacity but is out of the country.
Business LPAs should be the cornerstone of an effective business continuity plan. Regardless of health, all business owners should have a LPA in place in order to protect their business and family finances.