You may have read one of my blogs before about Lasting Powers of Attorney and how these can help you if you are unable to make decisions for yourself – either permanently or temporarily. A Lasting Power of Attorney can either be created to protect your Property & Financial Affairs or your Health & Welfare.
Let us say that, in addition to your personal estate, you also own and run a business. If we consider the Property and Financial Lasting Power of Attorney, these are designed to cover all finances and decisions including your business but it might be that the person you appoint to manage these personal decisions is ill-equipped, qualified or experienced enough to manage business ones.
Some people have heard of a Business or Commercial LPA but in fact there is no such document. If you wish to protect your business interests and ensure that it is looked after in the event that you are unable to do so you would need to create a standard Property & Financial Affairs LPA and indicate that it is to cover business affairs only “My attorneys only have the authority to use my business accounts and make decisions relating to my business. They are not permitted to use my personal account or make decisions about my personal finances.”
Conversely you would therefore want to annotate your personal LPA as follows: “My attorneys only have the authority to use my personal bank account. They are not permitted to access my business account or make any decisions relating to my business.”
There are 3 types of business set up and each one will have a different effect on the consideration of an LPA:
Sole Trader – As the sole owner and operator of your business it is likely that there will be no one in place to take over should anything happen to you. It is therefore important to consider what you want to happen in this event.
Partnership – When a Partnership is set up you may put a partnership agreement in place which outlines what will happen if one ‘half’ of the partnership is unable to operate, it is important to check this before creating an LPA to ensure that the two documents do not contradict one another.
Limited Company – As a Limited company you will have Articles of Association which could contain provisions for loss of capacity, illness or even death so it is important to check these before making an LPA to ensure, again, that they do not contradict one another.
When choosing attorneys for our personal estate we often turn to friends or, more likely, family but when it comes to your business you may want to decide who will be best equipped to carry out tasks such as continuing to run the business, paying salaries to staff, signing cheques, accessing the business account or even paying bills. This could be due to an extended holiday, an illness or accident or simply due to a loss of capacity.
It is important that a Lasting Power of Attorney is made whilst you still have capacity. If you fail to do so and you do end up in a position where you are unable to operate the business, then it is likely that the bank will freeze the accounts. Removing this block will require an application to the courts for Deputyship which can take up to 6 months and have a significant cost attached to it.