A lasting power of attorney (LPA) is a legal instrument that allows you to delegate decision-making authority to another person of your choice.
One of the most important aspects of company planning is business continuity. The main goal is to maintain the smooth operation of the firm in the case of a disruption.
As a business owner, it’s tough to imagine surrendering control over any decision, much less over every element of your day-to-day operations and long-term business strategy. However, for many business owners, there will come a moment when this is required.
Shareholders, partners, and sole traders are just a few of the types of company owners who might benefit from hiring an attorney. Would someone be able to take over the firm and its finances if a business owner became incapacitated due to an accident or illness? Keep reading to learn more.
- What does power of attorney mean?
- Why should you have a business lasting power of attorney?
- Types of power of attorney
According to the Consumer Financial Protection Bureau (CFPB), a power of attorney is a legal document that enables someone else to take action on your behalf. Signing a power of attorney authorizes the person named on the document to act on your behalf.
The individual named in the paper is referred to as the “agent” or “attorney-in-fact”. As the agent does not have to be an attorney, the latter phrase is ambiguous.
Powers of attorney are flexible, and a knowledgeable attorney can assist you in restricting what your agent can do. Similarly, your power of attorney may be divided among several persons, each with their own obligations and the capacity to do business on your or your company’s behalf.
Each of these powers of attorneys can be active at the same time, giving you many agents to assist you with the duties that your company requires.
Any business leader should think about what would happen to their company and its day-to-day operations if they were unable to make choices. Without an LPA in place, it’s unclear who may assume control and who has the power to do so, thus exposing a company to danger.
A business LPA can be utilized if the owner of the business:
- is on vacation or business and has been in an accident that renders them incapable of acting.
- has a debilitating physical condition that renders them incapable of performing.
The entire issue goes down to your company’s structure and how critical it is to have someone in charge of running it effectively. You’d prefer someone to be in charge of your firm if you become disabled or unconscious.
Power of attorney provides several benefits that will assist a business with day-to-day operations when you are unable to do so. If your firm is an LLC or corporation, you may only need a power of attorney for your estate planning and administration rather than for the company.
You should look into the various forms of power of attorney and have them on hand in case the unimaginable occurs.
Who is Suitable for Business LPA?
- A person who is self-employed because they are not a distinct legal entity from their company
- A sole trader because they are not a separate legal entity from their business.
- A corporate director whose incapacity is not protected by the firm’s Articles of Association or Memorandum of Association.
- If a partner’s incapacity is not addressed by the articles of association or memorandum of association, a partner within a partnership.
1. Power of Attorney for Financial Matters
The financial power of attorney, according to Investopedia, allows an individual to handle the financial obligations and tasks if the principal is unable to do so. Financial power of attorney for an agent may be required if you:
- You’ll need to delegate your company’s operations.
- Choose lawyers and make judgments about cases
- Taxes must be filed and paid.
- Transactions with banks and other financial institutions are required.
- You must deal with your financial portfolio as well as your retirement plan.
- Bind yourself to a contract.
- Purchase or sell real estate or various forms of property.
2. Power of Attorney for Special Purposes
The scope of a special power of attorney is highly limited. As a business owner, there may be instances when you need to get something done for the company but are unable to do so due to other obligations.
A special power of attorney is a legal instrument that authorizes a specific agent to act on your behalf for a specific and defined event, such as establishing a bank account, resolving a dispute, or signing a contract.
3. Power of Attorney for Health Care
A healthcare power of attorney gives someone the authority to make medical choices on your behalf if you’re stuck in the hospital and can’t communicate because you’re disabled.
When appointing someone to act as your healthcare power of attorney, it’s critical to choose someone close to you who will understand your wishes even if you can’t express them consciously.
Most people pick a close family member or spouse as their healthcare power of attorney, while others choose a close friend or confidante.
Choose the Perfect Candidate as Your Attorney
In a business, the agent you choose for your power of attorney should be someone you completely trust. They should be able to understand and carry out your directions, as well as be aware of how you want the firm to function in your absence.
Your decision should be based on their current skills and abilities. It’s not a smart idea, for example, to choose a family member as your agent when they’ve never demonstrated any aptitude for the job before.
Disclaimer: MoneyMagpie is not a licensed financial or legal advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial or legal advice. Anyone thinking of investing should conduct their own due diligence.