Why do I need a business Lasting Power of Attorney?
Posted on 22nd October 2018 at 17:45
If you are a business owner, making sure that someone can make decisions on your behalf could make the difference between your business continuing or failing.
You can authorise someone to make decisions with a lasting power of attorney (LPA). This is important if you are abroad, have an accident and are unconscious or have a medical condition such as dementia, for example.
You can give someone you trust authority to pay bills, sign cheques, manage a business loan and pay salaries.
Types of business
If you are a sole trader, you are personally in control of all aspects of your business. Setting up a business LPA is a good way to keep your business running if you are unable to make decisions.
If you are in a partnership you will need to check your partnership agreement. It might already cover what would happen if a partner is incapacitated. It’s worth checking that you’re are happy with the arrangements – if you are, then you won’t need a business LPA. However, if you’re not sure that everything is covered as you wish then take advice on whether a business LPA would be appropriate. Care is needed to make sure it wouldn’t conflict with your partnership agreement.
As the director of a company, the articles of association will often include details of what should happen if a director loses capacity. If this isn’t included, take advice on whether it should be added.
If you’re the only director of a small private company, the articles of association probably won’t include this provision, and a business LPA could be a good solution for you.
Personal and business affairs
You might be able to set up a single LPA that appoints attorneys to manage your personal and business affairs. You can appoint specific attorneys to manage your personal assets, and others to manage your business.
You will need to consider whether there are any possible conflicting interests in this arrangement.
There could also be confusion about the powers of your attorneys, in which case the Office of the Public Guardian might reject your LPA.
You can make more than one LPA, so it might be more effective to have one for your personal affairs and a separate one for your business. If you make two LPAs, each should make the scope of the other attorneys’ powers very clear.
Court of Protection
If you don’t have a business LPA and you’re unable to make business decisions a deputy might be needed to act on your behalf. This would involve an application to the Court of Protection, which is expensive and can take six months or more. The person the Court appoints might not be someone would have chosen and in the meantime your business could be at a standstill.
To be confident that your business has a secure future, making a business LPA is well worth considering.
Please get in touch if you would like some advice.
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