BUSINESS POWER OF ATTORNEY – HOW YOUR CLIENTS CAN PROTECT THEIR SUCCESS
Whilst many of us have heard of a Lasting Power of Attorney (LPA), Business LPAs are much less common, however, can be a vital part of Estate Planning if your clients own a business.
Many people consider their private wealth and the protection of their families when organising their estate planning, however, how a business would be affected if a major shareholder or managing director were to become mentally, or physically incapable of performing their role, is often missed.
Business owners will more than likely have measures in place to protect their premises in the event of a fire or flood, but yet, have not considered the running of their business if they were no longer able to do so.
The consequences of not having a Business LPA in place can be monumental. For example, if your clients own a business and lose capacity, it is possible for the bank to freeze accounts very quickly. With nobody allowed access to any funds to pay wages, creditors and the tax man, the business would suffer and more than likely, lead to failure.
Putting a Business LPA in place allows your client to appoint somebody they trust and crucially, someone who understands the business in order to take over the day-to-day management, as soon as they are required to do so.
It is possible to allocate very specific roles within the company, but crucially ensures the ongoing running of the business. The BLPA would not be actioned, until such a time it is required.
All types of businesses can put in place a BLPA. A sole trader business that is not a separate legal entity from the owner are relatively simple and can be very effective as part of their overall estate planning.
Where Partnerships are concerned, provisions tend to be considered as part of the partnership agreement, therefore, a BLPA would not be necessary in these circumstances, but are worth double checking.
However, for directors of limited liability businesses, it is well worth looking at the articles of association, which may contain provisions for what would happen if a director became incapacitated, but in many cases do not make provisions for such instances.
If your client is the sole director of a small private company, or there would be no one else to continue running the company in the event of their incapacitation, a business LPA would highly desirable.
If you or your clients would like to explore a Business Lasting Power of Attorney, please contact Jo Mapletoft on 01623 883850.