Lasting Powers of Attorney (LPA): the benefits of a Business LPA

A Property and Financial Affairs Lasting Power of Attorney is an important part of personal planning. But if you own a business, have you considered what would happen if you were suddenly unable to manage your business due to a loss of mental capacity?

For many business owners, the day-to-day running of the business depends heavily on one individual. They may be responsible for banking, paying staff and suppliers, raising invoices, and making important financial decisions.

Putting a separate LPA in place for your business affairs can ensure that someone you trust, and who understands your business, is able to deal with those matters if you are unable to do so.

What is a Business LPA?

There is no specific legal document called a “Business LPA”. However, it is possible to make two separate Property and Financial Affairs LPAs, one that deals with your personal property and financial affairs and another limited to your business affairs.

This can allow you to appoint different attorneys for your personal and business matters.

The person you choose to manage your personal finances may be entirely suitable for dealing with your household bills, personal bank accounts and other day-to-day financial matters. However, they may not be suitable to manage your business.

Why would an additional LPA be useful to a business owner?

Would the person appointed as your attorney for your personal affairs know how to keep your business running if you were suddenly unable to do so?

For example, would they know:

• Which bank the business account is held with?
• When wages are paid, how they are paid and to whom?
• What the regular business outgoings are and how they are paid?
• Which invoices need to be raised and when payments are due?
• What financial commitments the business has?

How could a Business LPA work?

A separate Business LPA can be prepared so that the attorney’s authority is limited to the management of your business affairs. If you also have an LPA in relation to your personal affairs, the instructions in each LPA need to be carefully drafted to distinguish between your personal and business affairs.

A Business LPA enables you to appoint one or more attorneys who understand the business, such as a trusted colleague or the other partners of the business, who would have the knowledge and experience necessary to deal with the business’s financial affairs.

Your choice of attorneys requires careful consideration. They should be individuals you trust and who can make appropriate decisions in your best interests.

The LPA should be drafted so that your personal finances are not then accessible to your business attorney.

What happens if a business owner loses capacity?

An LPA is a form of contingency planning. It is something we hope will never be needed, but putting one in place can provide certainty at a difficult time.

For example, if a sole trader becomes unable to make or communicate decisions because of an accident or illness, the business may suddenly be without the person who normally deals with its financial affairs.

At an already stressful time, having an appropriate LPA in place can help ensure that someone trusted has the authority to deal with the relevant financial affairs of the business.

If you are a partner in a partnership or a shareholder in a limited company, it is essential that the authority conferred in the Business LPA is consistent with the partnership or shareholders’ agreement. If there is any conflict between the two, the partnership or shareholders’ agreement takes precedence.

Don’t wait until you need it

LPAs take approximately 12 weeks to register with the Office of the Public Guardian – they cannot be used until they are registered. If an LPA hasn’t been prepared and registered before it is needed, there will be a delay in putting an LPA in place. This could be disruptive and damaging for the business.

Once capacity has been lost, an LPA cannot be put in place. When loss of capacity occurs without an LPA in place, it is necessary to make an application to the Court of Protection for a deputyship order. This lengthy legal process could have drastic consequences for the future of the business.

The benefit of an LPA is that it allows you to decide who should act for you before an unexpected event occurs.

How Pinney Talfourd can help

If you own or run a business, putting the right arrangements in place now can help protect its future should you become unable to make decisions.

Our experienced Private Client team can advise you on preparing a Business LPA, helping you appoint the right people to manage your business affairs and providing peace of mind for the future.

To discuss your circumstances, call your local office on 0800 011 1195 or email .