SMALL TO MEDIUM BUSINESSES AND LASTING POWERS OF ATTORNEY – WHY WOULD YOU NEED ONE?
When a small to medium business (SME) is first formed it is probably the last thing on the owner’s mind to think about what would happen if they can no longer run the business themselves due to a long-term debilitating illness, accident, or worse, a stroke or dementia.
SMALL TO MEDIUM BUSINESSES AND LASTING POWERS OF ATTORNEY – WHY WOULD YOU NEED ONE?
When a small to medium business (SME) is first formed it is probably the last thing on the owner’s mind to think about what would happen if they can no longer run the business themselves due to a long-term debilitating illness, accident, or worse, a stroke or dementia.
Mental capacity can be lost temporarily or permanently. If that happened, you should ask yourself how important you are in the running of the business. If you lacked capacity what would happen to your business? Would it have to close? Who would pay the wages, invoices, meet the rent or mortgage payments, or make day-to-day decisions about the financial administration of your business? Are you prepared? A Business Lasting Power of Attorney could avoid all of that uncertainty.
What is a Lasting Power of Attorney?
Lasting Powers of Attorney (LPAs) are legal documents that give other people (your Attorneys) the right to make decisions on your behalf. There are two distinct types of LPA; health and welfare and property and financial affairs. You may decide to have one for personal property and financial affairs and one for your business affairs.
You can appoint different people as your Attorneys to make decisions on your behalf if you no longer had the capacity to do so yourself. A family member may be appropriate to discuss your medical needs, whereas an associate who knows your business and how best to run it might be better suited in the business LPA.
Once registered at the Office of the Public Guardian the LPA can then be put away until such time that they are needed, much like a long-term insurance policy.
Do I need a Lasting Power of Attorney?
An informal agreement is not sufficient to allow someone else or even a spouse to have the authority to step in and run your business should you be unable to do so. Bank accounts could be frozen, and management or accounts staff left unable to access them without your express permission. Simply; banks, utility companies and other institutions will not talk to someone who is not the account holder without an LPA in place. It is not possible to make an LPA when that person has lost capacity, you must make one ahead of time and before it is needed.
With a registered LPA in place your Attorney or Attorneys can step in at short notice and continue to run the business on your behalf or wind it up, as appropriate. This will depend on factors such as your ongoing health needs, the likelihood of you returning to work and how vital your role in the business is in continuing without you.
Amye Aris, Wills, Probate and Life-time Planning solicitor says “LPAs are key for any sole-trader, freelancer or business owner/operator. If you fall within one of those categories you should think carefully about what would happen to your business, financial security, and any employees’ futures if you were unable to carry out your role due to incapacity. Planning ahead with an LPA in place would alleviate much of the cost and stress to family members at a very stressful time for all”.
For more information about LPAs and all our services call 01908 542 677 or email amyearis@newleafsolicitors.co.uk
