One of the first things that you do, when you start your own business, is take out some form of business protection. Usually this is some type of business insurance, such as employers’ liability insurance or building and contents insurance. These are great ways to ensure that your business is protected. Maybe you have not considered what will happen to your business if you suddenly became incapable of making important decisions or running your business on a daily basis. This can be due to suffering from some form of physical or mental incapacity. It can be caused by an accident, injury, illness or disease. It can even just be due to being abroad for work or holiday purposes. You can protect against this type of situation, with a Business LPA (Lasting Power of Attorney).
A Business LPA is similar to a personal Lasting Power of Attorney, in the way that you appoint an ‘attorney’ to act on your behalf, This attorney will be able to important business decisions when you are unable to.
Who Can Be An Attorney?
Usually, with a personal LPA, you would choose someone that you know and trust to run your personal affairs. This is often a spouse/partner or a sibling. With a Business LPA it is advisable that you choose someone that is capable of running your business for you. They should be someone that you trust to do it well and who can manage your professional affairs. If you have a business partner, they may be your first choice. You will also need to consider whether the person acting on your behalf requires to be authorised to carry out your business. This is particularly important if you are a financial adviser or an accountant, for example.
What Will An Attorney Do?
In most cases, your chosen attorney will have the power to
- Buy and sell property (such as your office space)
- Manage your bank accounts
- Organise insurances
- Make investments
- Pay invoices
- Pay staff wages
- Order supplies
What If I Have More Than One Business?
If you have more than one business it is best practice to create one LPA for each business. There is a chance that if the LPA is created for business affairs in general, the Office of Public Guardian (OPG) could reject the document for being too vague. If one LPA is created for more than one business, and one of them ceases trading, the LPA will cease to exist. This is because it will specify that the appointment refers to all businesses, and so it will fail.
What If I Don’t Have A Business LPA?
A situation can arise, where you are unable to run your business. If you do not have a Business LPA in place, your partners or colleagues will not automatically be granted the right to do it for you. This can result in further complications. Without anyone to manage your bank accounts, staff’s wages may not be paid. This can lead to them finding paid work elsewhere. Invoices and suppliers may also not get paid and stock might not be bought. This can also lead to additional strain on your family members, particularly if they rely on your business as a source of income or work.
Why Is Having A Business LPA Important?
The Mental Health Discrimination Act 2013 has made having a Business LPA even more important, as for many Partnerships and Companies a Director/Partner cannot be removed as a Director due to loss of mental capacity. This can cause complications for the business, and whilst applying for Deputyship is an option, it is usually a timely and costly one. If you are a Sole Trader, and you are unable to run your business, it can result in you losing your business completely. Without someone to run it on your behalf, your business can fail. There will also be no one in authority that can wind the business up and sell it on for you.
Having a business LPA should be treated as another form of insurance. It will ensure that if you have to take time away from your business, there will be a business for you to come back to. An additional benefit of having a Business LPA is that it will be classed as a company document and therefore the company should be able to ensure the costs.
Want To Protect Your Business?
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