Planning for the future is an important part of running a business. Most owners spend time thinking about growth, staff, cash flow, contracts and succession. Fewer people stop to consider what would happen if they were suddenly unable to make decisions for themselves.
A Lasting Power of Attorney, often called an LPA, allows you to appoint someone you trust to make decisions on your behalf if you lose mental capacity, or in some cases if you simply need help managing your affairs. There are two types: one for health and welfare decisions, and one for property and financial affairs. For business owners, it is the property and financial affairs LPA that usually needs careful attention. The property and financial affairs LPA can cover any decisions about money, property, bank accounts, bills and financial arrangements.
A Business LPA is not a separate statutory form. In practice, it is a property and financial affairs LPA drafted specifically to deal with business interests. It can sit alongside your personal LPA, allowing you to keep your home finances and commercial affairs separate.
Erin Clarke, Managing Associate and Head of Wills and Probate at Bromleys, explains the key considerations surrounding Business LPAs, helping business owners understand their options and take practical steps to safeguard their business with confidence.
Why might a personal LPA not be enough for a business owner?
A personal LPA may work well for household finances, savings, pensions and day-to-day bills. That does not mean it is suitable for business decisions.
The person you would trust to manage your personal bank account may not have the experience, confidence or availability to deal with business banking, staff wages, supplier contracts, tax deadlines, commercial leases or urgent decisions involving clients.
Equally, someone who understands your business may not be the right person to make decisions about your home, family finances or personal investments.
This is where a separate Business LPA can be useful. The Office of the Public Guardian’s own guidance recognises that a person can appoint different attorneys for personal finances and business affairs.
For many business owners, that separation can be a sensible way to protect both sides of their life.
What could happen to your business if you lose capacity?
If you become seriously ill, suffer an accident, or lose the ability to make certain decisions, your business may still need to operate.
Staff may need paying. Invoices may need approving. Contracts may need signing. Clients, customers or suppliers may need urgent answers.
A common misunderstanding is that a spouse, adult child, business partner or senior employee can automatically step in. That is not usually the case. Without the correct authority, even close family members may be unable to make financial decisions on your behalf.
Guidance from the government makes clear that an LPA must be registered before it can be used, and attorneys must act within the powers given to them.
If there is no suitable LPA in place, it may be necessary to apply to the Court of Protection for someone to be appointed as a deputy.
That can take time and may be more restrictive than planning in advance. OPG guidance also notes that mistakes in an LPA can cause difficulty if they are only discovered after the donor has lost capacity.
For a business, delay can create practical problems quickly. Even a short period of uncertainty may affect cash flow, staff confidence and key commercial relationships.
Who should think about making a Business LPA?
A Business LPA may be worth considering if you are closely involved in the running or control of a business. This may include:
- Sole traders.
- Company directors.
- Shareholders with management responsibilities.
- Partners in a partnership.
- Members of an LLP.
- Owners of family-run businesses.
The need may be particularly pressing where the business depends heavily on one person’s authority. A sole trader, for example, may have no separate management structure.
A sole director company may face particular difficulties if there is no one else with practical authority to act.
That said, the position is not the same for every business. Company documents, partnership agreements and LLP agreements should be checked carefully. Some may already contain provisions dealing with incapacity, while others may not cover temporary absence or loss of capacity in enough detail. The Gazette’s guidance on business LPAs also highlights the importance of considering the type of business structure involved.
This is why tailored advice is important. A Business LPA should work with your business arrangements, not cut across them.
Can the same attorney deal with both personal and business affairs?
In some cases, yes. If the same person has the right skills, judgment and availability, appointing them for both may be appropriate.
In many cases, however, separation is safer and clearer. For example, you may want:
- a spouse or family member to manage your personal finances
- a fellow director, trusted colleague or professional adviser to deal with business matters
- replacement attorneys in case your first choice cannot act
- clear instructions limiting what each attorney can do
This can help avoid confusion and reduce the risk of personal and business decisions becoming mixed together. Attorneys are expected to act in the donor’s best interests, keep appropriate records and follow any instructions in the LPA. Guidance from the government also states that attorneys should keep the donor’s money and property separate from their own unless there is already a shared account.
For business owners, clarity matters. The more specific the arrangements, the easier it may be for banks, accountants, colleagues and family members to understand who has authority to deal with what.
When can a Business LPA be used?
A property and financial affairs LPA can be used once it has been registered, provided the donor has allowed this. Alternatively, it can be drafted so that attorneys can only act if the donor loses mental capacity.
This flexibility can be useful for business owners. For example, you may want an attorney to deal with certain commercial matters if you are abroad, recovering from surgery, or temporarily unavailable. In other cases, you may prefer the authority to be limited to situations where you can no longer make the relevant decision yourself.
The right approach depends on your business, your role, and the level of trust you have in the person appointed.
How does a Business LPA fit with wider business planning?
A Business LPA should not be viewed in isolation. It is usually part of wider continuity planning.
You may need to consider:
- Whether your Articles of Association deal with director incapacity.
- Whether a shareholders’ agreement contains relevant provisions.
- Whether a partnership or LLP agreement already sets out what happens.
- Who can access business bank accounts.
- Who can authorise payroll, tax payments and supplier invoices.
- Whether your chosen attorney has the commercial knowledge to act effectively.
The aim is not to create unnecessary paperwork. It is to make sure the right people can make the right decisions at the right time.
How can Bromleys help with Business LPAs?
A well-drafted Business LPA can help reduce uncertainty if illness, injury or loss of capacity affects your ability to make decisions. It can also give your family, colleagues and professional advisers a clearer framework to follow.
At Bromleys, we provide practical, clear advice on Lasting Powers of Attorney and future planning. If you already have a personal LPA, we can review whether it properly deals with your business interests. If you do not yet have one in place, we can help you consider who should be appointed, what powers they should have, and how the document should work alongside your existing business arrangements.
Give us a call us on 0161 330 6821 or email bromleys@bromleys.co.uk to discuss whether a separate Business LPA may be appropriate for you and your business.