What happens if you can’t run your business tomorrow?

Most business owners spend time planning for growth, but far fewer consider what would happen if they were suddenly unable to make decisions for the business.

Illness, an accident, or even a temporary medical condition could leave you unable to deal with contracts, banking, staffing, or day-to-day operations. The assumption is often that someone else can simply step in, but that is not always the case.

For company directors, the ability of others to act may depend on the company’s governing documents. For sole traders, the situation can be even more difficult, as there may be nobody with the legal authority to make decisions on behalf of the business.

A Business Lasting Power of Attorney allows you to appoint someone you trust to act if you were no longer able to make decisions for yourself. It can cover practical matters such as managing finances, paying suppliers, and keeping the business running, and it can be structured separately from your personal affairs.

Like any good contingency plan, it is something you hope never to need. But if the unexpected happens, having one in place can make a significant difference to the continuity of the business and the people who rely on it.

Why can’t someone else simply step in?

One of the biggest misconceptions is that a spouse, fellow director, business partner or family member can simply take over if you’re unable to make decisions.

In reality, it isn’t always that straightforward.

The authority to make decisions depends on how your business is structured and what legal arrangements are already in place. Without the appropriate authority, even someone who knows the business inside out may find themselves unable to access bank accounts, sign contracts, instruct accountants or deal with suppliers.

For sole traders, the position can be particularly difficult. As the business and the individual are legally one and the same, there may be nobody with the legal authority to keep things moving.

What is a Business Lasting Power of Attorney?

A Business Lasting Power of Attorney allows you to appoint one or more trusted people to make decisions about your business if you were no longer able to make decisions for yourself.

Unlike a personal Lasting Power of Attorney, which deals with your personal finances and property, a Business LPA focuses solely on your business affairs. Keeping the two separate often provides greater flexibility and allows you to appoint the most appropriate people for each role.

For example, you may want a family member to manage your personal finances, while appointing a business partner or fellow director to deal with the day-to-day running of your business.

What decisions can it cover?

A Business Lasting Power of Attorney can authorise your chosen attorney to deal with many of the practical responsibilities involved in keeping a business operating, including:

• Managing business bank accounts
• Paying employees and suppliers
• Dealing with customers and contracts
• Instructing accountants and other professional advisers
• Managing cash flow and ongoing financial commitments
• Making day-to-day operational decisions

The exact powers can be tailored to reflect your business and your individual circumstances.

Is it only relevant for larger businesses?

Not at all.

In many cases, smaller businesses have the most to lose.

Owner-managed businesses often rely heavily on one individual. If that person suddenly loses the ability to make decisions, the consequences can be immediate. Staff may not be paid, suppliers may be left waiting, contracts could be delayed and customers may begin looking elsewhere.

For sole traders, there may be no one with the legal authority to act at all.

Planning for the unexpected

No one likes to think about losing the ability to make decisions, particularly when they’re busy running a successful business.

A Business Lasting Power of Attorney isn’t about expecting the worst. It’s about putting sensible arrangements in place so your business can continue to operate if life takes an unexpected turn.

Much like insurance, it’s something you hope you’ll never need. But if the time ever comes, having the right legal authority already in place can make all the difference to your business, your employees and the people who rely on you.

If you’ve never considered how your business would continue without you, it may be worth getting in touch with us today. We’d be happy to explain your options and help you decide whether a Business Lasting Power of Attorney is appropriate for your circumstances.