It’s probably not a subject that many people think about and by the time they need to think about it, it’s too late! This is what happens when you are incapacitated and you haven’t appointed someone with a Power of Attorney to run your business when you can’t.
A power of attorney (POA) for a business is a legal document that grants a designated individual or entity the authority to act on behalf of a company in specific legal, financial, or administrative matters.
There are a few different types of POA but, the Lasting Power of Attorney (LPA) is the most commonly used in the UK.
Most people will have heard of the Lasting Power of Attorney for Finance and Property but, may well not associate it with their business. This is a serious problem because what happens if you lose the capacity to make decisions?
This could be a temporary thing because you are in hospital or abroad or more permanent because of an accident or illness. Either way, if you don’t have the capacity to run your business, who runs it for you?
Here, Rebecca Seeley Harris from MyPOA.uk explains more.
Can’t my next of kin deal with it?
There is a common misconception that your spouse or next of kin will be able to handle your affairs but, unless you have given them the authority under an LPA, they will not. If you run your business through a limited company, it is even more important. You will need to specify that your attorney has access to your business banking and any other business accounts.
What if you haven’t appointed an LPA?
If you are incapacitated, whether temporary or permanent, and you haven’t appointed an LPA, the matter will have to go to the Court of Protection. The court then has to appoint what is called a deputy, this can be a member of the family or a professional, such as a solicitor. Remember though that this will take months and is very stressful. In the meantime, you are also having to deal with your loved one being incapacitated and everything that goes with it.
The repercussions of this are quite grave. Whilst the person is incapacitated, there will be no access to funds. So, invoices won’t be paid, salaries won’t get paid unless they are automated and dividends can’t be paid either. Usually, even if you have had third-party authority whilst the person was capable, once they are not, the bank or other organisation will have to deny access to anyone without an LPA.
What do you need your Power of Attorney for business to do?
An LPA should be part of ‘continuity and emergency planning’ for business. One of the primary reasons for having an LPA in place is continuity planning. Without one in place, critical decisions may be delayed or hindered, potentially harming the company’s operations, reputation, and financial stability.
You may want to consider the following:
- Authorising the payment of bills
- Signing cheques
- Paying salaries
- Signing a contract in the absence of the business owner
- Making a loan payment
- Cancelling appointments
- Being able to access systems to let clients know
- Organising cover
Do you need a separate LPA for business?
In many cases, it is advisable to have a separate LPA for business matters, especially if you want to ensure that your business affairs are managed separately from your personal matters.
Here are a few reasons why having a separate LPA for business can be beneficial:
- Clarity and Organisation: Keeping your personal and business affairs separate with separate LPAs can help maintain clarity and organisation. It ensures that the person or persons you appoint to make decisions for your business are only responsible for business-related matters, reducing confusion and potential conflicts.
- Privacy: A separate LPA for business can help protect the privacy of your personal matters. By segregating your personal and business affairs, you can limit the information accessible to those handling your business affairs, which can be important for confidentiality.
- Flexibility: Business operations and personal matters can have different timelines and requirements. Having separate LPAs allows you to grant different powers, durations, or conditions for each, providing flexibility tailored to the specific needs of your business.
However, there may be circumstances where it is appropriate to have a single LPA that covers both personal and business matters. This can be the case if your business is closely intertwined with your personal affairs, and it’s clear that a single attorney should oversee both areas. The decision to have separate or combined LPAs should be made based on your individual circumstances and preferences, and it is advisable to consult with legal professionals to ensure your LPA(s) are drafted in a way that meets your specific needs.
Does my Business LPA get paid?
Ordinarily, an attorney under an LPA doesn’t get paid. Where a business LPA is concerned, however, it would be advisable to consider whether you should have an agreement for the attorney to be paid. They are, after all, essentially working on behalf of your business.
Three Key takeaways
- Consider who will run your business if you can’t, whether this is temporary or permanent.
- Should you have a separate LPA for personal finance and business?
- Think about whether or how much to pay your attorney.
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