Over recent years, there has been an increasing recognition, helped by the likes of Martin Lewis, of the importance of Lasting Powers of Attorney (LPAs).
These are documents that allow you to choose who will manage your affairs when you are no longer able or if you require assistance, and who will make decisions about your health and welfare when you have lost mental capacity.
A common misconception is that your spouse, civil partner or children will be able to deal with your affairs should you become unable, but that is incorrect, and only a person appointed under a registered power of attorney can manage property and finances held in your sole name.
Therefore, all adults who own assets in their own name should have LPAs in place, but this is particularly important for business owners.
Our specialist Wills, Trusts and Probate lawyers explore how a Business Lasting Power of Attorney (LPA) can protect both you and your business, ensuring continuity and safeguarding operations if you are unable to make decisions.
Why would I need an LPA to protect my business?
If something happens to you and you are unable to act or make decisions about your business in the usual manner, either temporarily or permanently, this could interrupt the functioning and success of your business.
For example:
- Accessing the bank account to pay staff, tax, loans, contractors or for materials etc;
- Signing new contracts or agreements;
- Purchasing/selling/managing business property.
If a business LPA is not in place, allowing your chosen individual/s to step in, this could have significant repercussions for the running of and ultimate success of the company.
For sole traders, a business LPA is nearly always going to be appropriate as there will be no company or partnership to rely on.
If you are a director or partner, there may be a provision in the partnership agreement or the company’s articles of association detailing how operations will continue in the temporary and/or permanent incapacitation of a director or partner. In the absence of such wording, a business LPA should be considered.
Can I just make one property and finance LPA ?
If you already have a property and finance LPA in place, or you are looking at putting one in place and want to know if you need a separate business LPA, it is important to think about the attorneys appointed.
Many people will want their close family or friends, such as spouses, civil partners, children or nieces or nephews, to help manage their finances and property.
However, these same persons may not be appropriate to make decisions about your business.
You may prefer for your business partner or one particular friend or family member to step in without the involvement of other family.
Similarly, you may not feel comfortable with your business partner making decisions about your personal finances.
As such, it is usually appropriate for separate LPAs to be created, one being limited to personal affairs and the other to business affairs.
I am in good health, do I need a business LPA now?
LPAs are not just for the elderly or unwell.
Whilst it is not easy to think about, an accident could occur at any age, which could render you incapacitated and unable to make decisions about your business.
Without the LPA, there is a risk that your employees or business colleagues may struggle to keep the business running smoothly.
Further, business LPAs can be set up to allow them to be used whilst you retain capacity but where it would be beneficial for someone to act on your instruction, for example if you were out of the country or suffer a minor injury which temporarily impacts your mobility or ability to work and someone needs to sign cheques, pay staff or settle loans.
A business LPA ensures that your chosen individual/s can keep the business operational in your absence at any time.
What happens if I don’t have an LPA covering business decisions?
If there is no LPA in place authorising decisions to be made about your business, an application will have to be made to the Court of Protection.
This is a costly and lengthy process and places more onerous burdens on the appointed deputy going forward.
The delay could place your business at risk if operations are impacted.
Further, you have no control over who makes this application and takes on the role. It could end up causing a dispute (causing greater costs and delays) or with an inappropriate or undesirable appointment of a deputy.
It is important for you and those involved in your business to consider this together and decide who should be appointed under a business LPA.
You should encourage others involved in the running of the company to make a business LPA too, to ensure that you and relevant others are granted power to step into their shoes in the same manner.
Contact Our LPA Lawyers
If you are considering business LPAs or you have an LPA in place and want to discuss how this will interact with your business, please get in touch with our specialist Wills, Trusts and Probate Team.
0161 941 4000
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Hannah Owens
Associate
Hannah has 2 years of experience acting as a Wills, Trusts, and Probate solicitor. Hannah assists clients in dealing with taxable estates including cross-border estates, Trusts and estate planning, as well as advising on Court of Protection applications and Powers of Attorney.
About Hannah Owens