The importance of a Lasting Power of Attorney as a business owner

Business owners are quite used to planning ahead. In fact, forward planning is considered essential to the life and health of any business. Whether it's personnel changes or the vagaries of the prevailing economic climate, failing to plan is planning to fail. But how many business owners prepare for what might happen to their business if they were to fall ill or become incapacitated? The future is always radically unpredictable and that’s why more business owners should seriously consider setting up a Lasting Power of Attorney (LPA).

What is an LPA? What is it for?

If you are a business owner, you may have heard of Lasting Powers of Attorney and assumed that they are something to do with elderly, infirm relatives but are not something you need to concern yourself with. But understanding what it is and what it can do may cause you to review that opinion.

An LPA is a formal document by which a person (known as ‘a donor’) can appoint another person (known as ‘an attorney’) to make decisions for them and even sign documents on their behalf in the event that they are incapacitated because of illness or injury.

There are two types of LPA: a health and wellness LPA, which addresses issues of personal welfare and medical treatment and a finance and property LPA, which addresses all financial, property and business matters. It is the latter which is relevant to you as a business owner.

Why does a business owner need one?

Every business owner is called upon to make crucial decisions every day, often several times a day. They also sign contracts, authorise expenditures, hire or fire employees and manage bank accounts. Without all this constant, day-to-day, hands-on management, the business will likely shudder to a halt. That is exactly what is likely to happen to your business if you, for any reason, become incapable of performing those tasks because of illness or injury. Hopefully, you will recover in due course, but only to find that you no longer have a business to return to.

It is far too widely assumed that a spouse or family member has the authority to sign cheques, contracts and make decisions for you if you are unavailable. That is simply untrue. Nor can you give someone authority to act in your stead verbally or even by means of a letter. The only way you can appoint someone who has the legally recognised authority to sign documents and make decisions on your behalf is by means of a finance and property LPA for business owners.

If you become incapacitated without an LPA in place, then someone will have to apply to the Court of Protection for something called ‘a deputyship’ order. That can take up to six months as well as being costly.

The elements of an LPA

You can appoint whomever you wish to be your attorney. However, it is best practice to consult that person beforehand to ensure that they are able and willing to assume the responsibility. You can also appoint more than one attorney and specify whether your attorneys must act jointly or whether they can act individually.

Your attorney could be your spouse, your partner, a family member, a friend, a work colleague or a professional adviser.

The LPA is a very flexible instrument. Not only can you appoint two or more attorneys but you can also leave all of them detailed instructions as a part of the document. You can also place conditions and restrictions on them or leave matters entirely to their discretion as you see fit.

While you are free to appoint the attorney of your choice, it is of the utmost importance that you appoint someone who you trust and who knows you sufficiently well to be able to make the decisions that they believe you would have made, had you not been incapacitated.

Attorneys for business owners are under a legal obligation to act at all times in the donor’s best interests.

“I’ll wait until I get sick”

That is not a good idea. First of all, any illness or injury you suffer may leave you unable to communicate, in which case you will be unable to give instructions to make an LPA. Secondly, even if you can communicate your wishes, an LPA is not valid until such time as it has been registered with the Office of the Public Guardian. That process can take as long as two to three months and, by that time, it may be too late.

It is advisable to make an LPA now while you’re fit and healthy, as it is an essential element of business succession planning. It is better to have an LPA and not need it, than to need an LPA and not have it.

While you can download the LPA forms from the internet, it is not advisable to tackle this yourself. The document must be completed in a specific manner and may not be accepted for registration if mistakes are made. Instead, make an appointment with a solicitor who has experience with LPAs and ensure that your business will remain operational and in safe hands if you are not well enough to run it.

For further information and trusted legal advice regarding a Lasting Power of Attorney (LPA), get in touch with us at Carlsons Solicitors.