“If I wasn’t here, how would my business run?!”
When you have your own company, it’s likely that you’ve said those words. Maybe in frustration at a colleague or supplier, or perhaps when you’re itching to take a day off. But have you ever really considered what those words mean? If you weren’t around, how would your business run?
This blog explains what a Lasting Powers of Attorney (LPA) is, the kinds of LPAs there are, and why you should consider a business LPA for your company. We hope you find it useful.
What is a Lasting Power of Attorney (LPA)?
An LPA is one of the most important documents you’ll ever have. If you become ill or lose the capacity to make decisions for yourself, an LPA allows a trusted representative to manage your wellbeing and financial decisions for you. The nominated person is called an ‘attorney’.
People often assume that their next of kin will be able to make decisions and handle their wellbeing and finances if they become incapacitated. This is not correct. Next of kin can’t automatically manage your affairs. For example, if you had a bank account in your sole name, your spouse or children would not automatically be able to speak to the bank and manage the money if you couldn’t do so. An LPA would give them the authority to do this, if you lost capacity.
There are two kinds of LPA to do with personal affairs that you may have heard of. The first is a health and welfare LPA and the second is a property and finance LPA.
There is also a third kind: a business LPA.
What is a business LPA?
The premise of a business LPA is similar to personal LPAs, in that it gives your nominated attorney the ability to take decisions on your behalf if you do not have the capacity to do so. As the name suggests, a business LPA relates to your business affairs rather than your personal finance or health.
You might wonder if you can create one LPA and appoint different attorneys to manage personal affairs and business assets. However, this is likely to be rejected by the Office of the Public Guardian, as it could cause confusion around the scope of the different attorneys’ powers.
The different types of LPA allow business owners to keep their personal and business affairs separate. It’s possible to have personal LPAs for health and finance as well as a business LPA.
Your personal LPA(s) should outline the scope of the attorney’s power. It should also make it clear that your attorney has power over your personal affairs, but not your business management.
Your business LPA should give specific instructions that your attorney has the power to manage business matters, but not your personal affairs.
This removes the potential for confusion and means that each attorney is clear about their responsibilities.
Who is a business LPA for?
The main people who can benefit from a business LPA are:
• Sole traders / the self-employed
• Businesses with a sole director
If these people were unable to run the business there would be nobody else to do so. This could cause serious problems such as not being able to pay suppliers or staff, being unable to deal with HMRC, or to fulfil contracts.
Business LPAs may also be suitable for:
• A company director (in a business where there are other directors)
• Those in a partnership
In the case of these businesses, there are other people who can continue the essential business activities in the event that one person is incapacitated. It’s also more likely that such businesses have procedures in place for these eventualities, although that’s not always the case. If there is no contingency plan, a business LPA is still a good idea.
The benefits of a business LPA
A business LPA offers peace of mind. You appoint a trusted and responsible person who can act on your behalf – temporarily or permanently – should the need arise. All your hard work building your business is not wasted, as operations can continue smoothly.
Don’t leave your business at risk. If you’re a business owner who’s taken the time to put your personal affairs in order, it’s worth doing the same for your company. Not only to protect your hard work, but to continue to provide for the people you love, even in difficult circumstances.
If you have any questions about business LPAs, we’d be happy to answer them. Call us on 0117 279 5507 for a consultation, with no obligation.