Ilyas Patel Accountants in Preston
Have you ever wondered what could happen to your business if you couldn’t run it anymore? We’ve partnered with Noor Law Solicitors to find out more about how a Business Lasting Power of Attorney can help your business.
Guest Article by Saara Patel, Director | Noor Law Solicitors
An LPA is a legal document that grants authority to someone else to make decisions on behalf of the business owner in case they become incapacitated or unable to make decisions themselves.
If you’re a business owner without a business Lasting Power of Attorney, the following issues could arise:
To avoid these issues, it’s essential for you to have a well-thought-out plan that includes a business Lasting Power of Attorney.
By designating a trusted individual to act on their behalf, you can ensure that your business operations will remain running smoothly, and that you safeguard the interests of your business, employees, and stakeholders.
Make sure to consult with legal professionals such as Noor Law to create an appropriate business LPA that aligns with your specific business needs and its ownership structure.
Accidents: they’re not something we like to think about, but that doesn’t mean they won’t happen.
For that reason, having a plan in place can safeguard your business and its value.
The strategy you’ll need varies depending on whether you’re a sole trader, part of a partnership, or running a limited company.
Let’s first touch on two crucial tools – Lasting Powers of Attorney (LPAs) and Wills.
An LPA lets you appoint someone to make decisions for you if you can’t.
There are two types: one for money matters, and one for health and care. We’re focusing on the financial one here.
Without an LPA, getting someone else to make decisions can take a long time and be a complex process involving the Court of Protection.
And remember, an LPA is only effective while you’re alive.
After you pass away, your Will determines what happens to your assets.
Here are a few benefits of financial LPAs for your business:
As a business owner, you’ll likely want your hard-earned business value to go to your loved ones.
A Will helps you decide who manages your business and who gets its value, as well as the best time for them to inherit.
A well-planned Will can save Inheritance Tax, shield the business from divorce or bankruptcy, and more.
Here are the benefits of writing a Will for your business:
If you’re a sole trader, you are your business – meaning your personal and business assets are considered as one estate when you pass away.
Your business and personal assets are held until probate is granted if you pass away.
Once probate is granted, your assets will be distributed according to the terms of your Will, or, if you don’t have one, according to the laws of intestacy.
As you can see, not having a Will nor a Lasting Power of Attorney in place might mean financial harm or disrupting your business!
To make matters worse, your assets are essentially frozen or put on hold upon your death until the probate process is complete – even if you do have a Will.
An LPA can let someone else make decisions if you can’t, and ensures your business will immediately keep running even after you’re unable to.
Additionally, it allows you to separate personal and business affairs.
You can appoint different attorneys so that the most appropriate person can handle each aspect of your life.
For partnerships, your agreement will dictate what happens when a partner can’t contribute anymore or passes away.
By appointing another partner or trusted individual as an attorney, you can avoid potential conflicts over who should make decisions in case one of you loses capacity.
An LPA can allow an attorney to take over decision-making alongside other partners.
Without a partnership agreement, the death of a partner can dissolve the partnership. An LPA allows you to prevent automatic dissolution.
Ensure your agreement allows the deceased partner’s share to pass under their Will to avoid potential tax issues.
In a limited company, decisions of directors and shareholders are separate.
If a director can’t work, an ‘alternate director’ can stand in.
However, if a shareholder loses capacity, their attorney can make decisions for them, including appointing a new director.
A well-drafted company document ensures maximum Inheritance Tax relief, safe transfer of shares to your family or a trust, and more.
In a nutshell, an LPA can help your limited company protect against the unexpected and is part of effective business risk management.
If you’re the only shareholder and director, and you can’t work without an LPA, there’s no one to vote in a new director.
Having a second director can ensure your business is running while probate is being granted in the event of your death.
Remember that every business is unique, and there’s no one-size-fits-all solution.
So, review your situation carefully and don’t let it be too late.
Secure the future of your business by setting up an LPA or drafting a Will with Noor Law Solicitors.
If you’d like to know more about how you can save on Inheritance Tax, send us a message using the contacts below.
If you need further help, contact us here and we’ll get back to you!