When we discuss financial planning, ensuring long-term security for you and loved ones is often a priority. But for business owners, they also need to ensure they protect their firm in the event of something happening to them. If you haven’t already taken steps to name a Business Lasting Power of Attorney, it’s something you should consider.
A personal Power of Attorney gives someone you trust the ability to make decisions on your behalf should you lose mental capacity, for instance, through illness or an accident. These decisions could relate to medical care or ensuring you continue to meet financial commitments. It’s a process that improves your security should something happen.
A Business Power of Attorney is less well-known but works in a similar way.
As a business owner, the firm likely relies on your skills and knowledge, as well as the decisions you make on a day-to-day basis. If a sudden illness affects you and you’re no longer able to make these decisions, it can have serious ramifications for the firm, employees and your long-term livelihood.
Even if you have someone you trust, without a Business Power of Attorney in place, they may not be able to access bank accounts or sign off contracts. The delays can lead to the demise of a business or significantly harm prospects.
Do you need a Business Power of Attorney?
If you were unable to make decisions, how effectively could your business run? If it means decisions relating to day-to-day operations or even long-term plans aren’t made, what would the effects be?
Depending on how your business is set up, there may be a whole range of things you might do that someone else can’t. This may include overseeing bank accounts, signing new contracts, paying employees and invoicing, or handling tax matters. If you were unable to make decisions it can have a serious impact on the business.
No one wants to think about not being able to make decisions themselves. But much like naming a personal Power of Attorney, naming one for your business is a precautionary measure.
Without a Power of Attorney, the business would have to rely on the Court of Protection to give someone the ability to act. However, this can be a lengthy process that takes months. It means some damage may happen before the Court of Protection names a deputy on your behalf. There’s also no guarantee that the Court of Protection will appoint the same person you’d have chosen.
It’s natural to have reservations about setting up a Business Power of Attorney but it offers protection.
Through a memorandum of wishes, you can set out how the attorney should operate the business. This can give you peace of mind that the business will proceed and move forward in line with your plans. You may also worry that using a Power of Attorney means you could lose permanent control of the business. However, where the loss of capacity to make decisions is temporary, the powers given to an attorney are too.
You need to carefully consider who you’d name as a Power of Attorney too. It should be someone that you trust but they also need to have the skills and knowledge to effectively make the decisions they need to. As a result, it may be someone inside the business that suits this role. It’s worth reviewing this regularly, as the right person may change over time.
Protecting your wellbeing
A Business Power of Attorney isn’t just about protecting business interests either. It can also provide you with security.
It can protect your livelihood and provides the tools those you trust need to make decisions. With the knowledge that someone you trust can make decisions, you can focus on your recovery. Instead, you’re able to focus on your recovery and ease back into the role of business owner when it suits you.
If your business could benefit from a Power of Attorney, seek legal advice. A legal professional will be able to help you understand what permissions should be given to an attorney to ensure the business continues to run smoothly. They can also help you draft a memorandum of wishes that outlines how the business should run if needed.
For many business owners, their personal financial plans are often intertwined with their business. As a result, it’s worthwhile reviewing your financial goals and situation alongside taking these steps.
Ultimately, a Business Power of Attorney can support the long-term security of the business, employees and your livelihood. Please get in touch if you’d like to discuss this further.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.