Do you need a Business Power of Attorney?
Posted on 12th November 2020 at 10:31
As a business owner it could be worth considering having a Business Lasting Power of Attorney (LPA). In the recent uncertain times, it has made many people aware of the need to have a safety net in place to ensure the smooth running of their business should unforeseeable circumstances arise.
Many businesses operate with one or two owners/directors. There is often an assumption that if there are two or more directors the other(s) can step into that person's role and run the business in their absence. However, simple things like paying bills and dealing with the Company Banking could be a major problem due to legal issues, and with data protection tightening, it becomes even more relevant in today's climate.
Personal assets given as guarantees could also be at risk. Banks may even freeze the Company account and pursue recovery of any loans (your home could also be at risk) if a director is incapacitated for a period of time.
What is a Business LPA?
It is a legal document which is created by the ‘donor’ who gives their representatives or ‘attorneys’ the authority to make decisions on their behalf regarding their business affairs should the donor no longer be able to do so. The LPA needs to be registered with the Office of the Public Guardian in order to make it a legally binding document. The donor has to be over the age of 18 and have ‘full mental capacity’ at the time of the document creation.
Why might you need one?
For many business owners, the people they may want to take over their business affairs should they become unwell, might not necessarily be suitable to do so. If there is no-one available that has this authority, then it can leave the business at risk. Therefore by having a Business Power of Attorney in place, it ensures the smooth running of the business with minimum disruption.
In addition to ensuring the continuity of the business it can also give security to any third parties connected to the business, such as creditors and banks by giving them reassurance that they will still be receiving payments on time.
Because the Business Attorneys will have been chosen by you, it can also give clarity and peace of mind.
Can I have one LPA to manage both my business and personal affairs?
This is a possibility, however, it may not be the best option for your business.
It would be preferable to have a separate LPA to look after your personal affairs. It will most likely be that the people chosen to look after your personal affairs may not have the level of business knowledge necessary to look after your business and vice versa.
If you do decide to have separate LPAs for your business and personal affairs, it will be imperative that clear instructions are given for each one. This will ensure that they are aware of their responsibilities and where these begin and end. By doing this it will ensure that clear boundaries are established and therefore reduce the risk of any conflict arising.
Having a Business Power of Attorney ensures the smooth running of your business and legally allows someone you trust to make decisions and deal with financial matters if you were unable to do so yourself.
Get in touch to discuss your options and how we can assist.
Nicola J Sorrell -
Founder | Xero Champion | IR35 Expert
Tagged as: Financial Planning
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