Are you a freelancer, sole trader or small business owner? If yes, have you thought about what would happen if you were suddenly not able to make decisions for the day-to-day running of your business, say through accident or severe illness? Many small business owners believe that their spouse or employees could simply take over until the crisis has passed but without a Lasting Power of Attorney in place this would not be possible.
A Business Lasting Power of Attorney or Business LPA is a legal document in which you can nominate between 1 and 4 people to have the legal right to take over if you have become unable to make financial and/or business decisions – either temporarily or permanently. Without an LPA nobody else can make decisions in your absence, access the bank account, chase outstanding invoices, make any changes to contracts, in short keep your business running smoothly. Employees and suppliers won’t get paid. Most institutions, such as utility companies, will only ever talk to the person named on the original contract. Businesses very quickly become incapacitated and can go under if no-one is legally allowed to make these decisions.
As an example, I recently visited a client who ran a small company, employing his wife and one other person. He was the only person empowered to make decisions and manage the finances of the company. I asked him what would happen if he were to become ill and unable to manage the business. He told me that within three months:
- Firstly the company would not be able to pay suppliers, so they would run out of supplies
- So the machines would stop running.
- So the employee would have nothing to do – but he wouldn’t be getting paid anyway so would have to be laid off.
- Soon there would not be enough money to pay the rent on the premises – so the company would fold.
He has now put in place a Business LPA so that his wife could continue to run the business if he were unable to do so – it cost him less than £500 in total.
Without a Business LPA your relatives or employees have to apply to the Court of Protection for special powers to continue running your day-to-day business and financial affairs which is a lengthy process and can cost thousands of pounds.
A Business Lasting Power of Attorney can be easily created and safeguards against all these problems. You decide in advance who you trust to make these important financial and business decisions and with the LPA in place they have the power to do so. The LPA can also limit which decisions the attorney can and can’t make, it is not a blanket permission to do as they please.
So in order to be prepared and ensure the smooth continuation of your business should the worst happen, it is highly advisable for any business owner to set up a Business Lasting Power of Attorney.
Please get in touch if you have any further questions about Business Lasting Powers of Attorney.
I, Amanda Harris, am a member of the Society of Will Writers and follow the Code of Practice laid down by the Society and all work is covered by Professional Indemnity insurance. I can also offer a secure storage and retrieval service for your documents.