Understanding a Business Lasting Power of Attorney (LPA)
A Lasting Power of Attorney (LPA) is a legal document that allows a business owner to appoint a trusted individual to manage their affairs if they become unable to do so due to illness, injury, or incapacity. While many entrepreneurs focus on growth, financial planning, and day-to-day operations, few consider the risk of being unable to make crucial business decisions. An LPA ensures continuity and protects the future of the business.
Why Every Business Needs an LPA
Many business owners assume that if something happens to them, their business partners or family members will automatically take over decision-making. However, without a properly appointed attorney, business operations can be severely disrupted. Banks may freeze accounts, suppliers may be left in limbo, and employees may be uncertain about the company’s direction. Having an LPA in place removes these risks and provides a clear legal structure for management in difficult times.
Start-ups: Building a Strong Foundation
For start-ups, the focus is often on innovation and securing funding. However, a strong legal foundation is just as important as financial backing. Establishing an LPA early on ensures that if the business owner becomes incapacitated, a designated attorney can handle financial transactions, sign contracts, and keep operations running smoothly. This is particularly critical for sole traders and single-member limited companies, where one person’s incapacity can halt the entire business.
Scaling Up: Protecting Business Growth
As businesses expand, responsibilities and financial commitments grow as well. Scaling up means more employees, larger investments, and higher stakes. Without an LPA, decision-making could be stalled in the event of unexpected incapacity, potentially leading to financial losses, contract breaches, and reputational damage. A business LPA helps maintain stability and reassures investors, stakeholders, and employees that the company has a contingency plan.
Key Risks of Not Having an LPA
- Frozen Business Accounts – Banks may refuse access to business funds without a legal authority.
- Operational Disruption – Without an appointed decision-maker, contracts, wages, and supplier agreements may be affected.
- Legal Battles – Family members or business partners may face lengthy and costly legal proceedings to gain control.
- Loss of Investor Confidence – Uncertainty can deter investors and damage business credibility.
Choosing the Right Attorney for Your Business
Selecting the right attorney is crucial. This individual should be trustworthy, financially responsible, and have a solid understanding of your business. Many business owners choose a co-director, senior employee, or professional adviser to act as their attorney. It is also advisable to seek legal guidance to ensure the LPA is properly structured and aligns with the company’s governance.
How to Set Up a Business LPA
Setting up an LPA is a straightforward process:
Decide on the Attorney(s) – Choose a reliable individual or multiple people who can act on your behalf.
Determine the Scope – Specify whether the LPA covers financial decisions, property transactions, or both.
Complete the Forms – Use the official UK Government forms (LPA for Property and Financial Affairs).
Register the LPA – Submit it to the Office of the Public Guardian (OPG) to make it legally valid.
A Smart Business Decision
From start-up to scale-up, having a business LPA in place is a crucial risk management strategy. It provides business continuity, protects financial interests, and ensures a trusted person can step in if needed. Proactively setting up an LPA today can safeguard your company’s future and give you peace of mind knowing your business is in safe hands.
0 Comments