Business Plans and a Commercial LPA
No matter what your interest in a business – owner, director, partner or sole trader – it just makes sense to protect the future of that business.
‘How?’ I hear you ask… You can start by ensuring you have a Will and Lasting Power of Attorney.
Establishing and maintaining a business takes a lot of time, effort and hard work. You do everything within your power to ensure success, including taking out insurance to safeguard against problems. However this isn’t always enough. What if you were to die or become mentally incapable of running things? How would this affect the empire you have worked so hard to build?
Death can disrupt the operation (and therefore the future) of a business. Depending on the structure, some types of businesses are exposed during the administration of an estate because there are limitations on what can be achieved until probate is granted and the estate is finalised – this can take many months, if not longer.
The continued success of a business can hinge on whether it passes to an appropriately qualified person after you are gone, who can make sure the business thrives.
Without a Will your estate will be distributed in accordance with the rules of intestacy and often the people who would benefit under these rules are not the people that you would choose. The good news is your death doesn’t have to mean the demise of your business – and making a Will is actually easier and cheaper than most people realise.
However, death is not the only issue to consider when planning for the future of your business. Mental incapacity is something that unfortunately can affect anybody at any time and, as a business owner, it is important to make sure that the operation of your business is not adversely affected. The easiest way to achieve this is to make a Lasting Power of Attorney (LPA).
A LPA is a legal document which allows you to appoint another person to be your Attorney, who can then make decisions and act for you if you ever lose mental capacity in the future. There are 2 types; one covering decisions regarding property and financial affairs, and one regarding health and welfare.
It is possible to make a 'Commercial’ LPA, purely for the purposes of running your business, although you may also want separate LPA’s for your personal affairs.
Having the commercial document in place will ensure that fundamental business operations can continue, should you become mentally incapacitated, and that an appropriate person can manage things on your behalf.
The Attorney will be able to access the accounts, pay wages, deal with suppliers and enforce contracts. Without an Attorney the effect on your company could be disastrous as no one would be legally entitled to manage the business. The only option then available would be for an application to be made to the Court of Protection to get authority to manage the business, but such applications are time consuming and expensive.
“Making a Power of Attorney is just another way to protect your business and, like any form of insurance, is invaluable if needed,” said Private Client Solicitor. “It is a simple and relatively inexpensive process, particularly when you consider the costs and time scales involved in making Court applications, it’s good business sense to safeguard against foreseeable risks, which sadly mental incapacity or illness is.”Subscribe to our newsletter
Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.
This blog was posted some time ago and its contents may now be out of date. For the latest legal position relating to these issues, get in touch with the author - or make an enquiry now.