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Have you thought about what would happen to your business if you were unable to make key decisions, for example, if you became injured or unwell?
That’s where a business Lasting Power of Attorney (LPA) comes in.
This crucial legal document could help ensure everything continues to run smoothly in your absence. And yet, a survey by the Lincolnshire Chamber of Commerce found that 90% of business owners do not have a business-specific LPA.
Keep reading to learn more about business LPAs and find out why you should consider putting one in place.
A business LPA is different from a personal LPA
All LPAs allow you to name people you trust (your “attorneys”) to make choices on your behalf if you lose the capacity to do so.
However, there are important differences between the scope and purpose of personal and business LPAs.
Personal LPAs
There are two types of personal LPAs:
- Property and financial affairs – For household bills, bank accounts, and so on.
- Health and welfare – For medical care and daily living.
You might appoint a family member, spouse, or close friend who understands your personal needs and wishes as your attorney or attorneys.
Business LPAs
These use the legal framework of a property and financial affairs LPA, but they are drawn up specifically to cover your business interests. For example, a business LPA might give your chosen attorneys the power to sign contracts and pay employees on your behalf.
You’ll need to nominate an attorney who has the skills and knowledge to make important decisions about your business. This could be a business partner, co-director, or an experienced colleague.
Benefits of putting a business LPA in place
If you become incapacitated without setting up a business-specific LPA, this could create a challenge for your business.
In some cases, families or colleagues may need to apply to the Court of Protection for authority to make essential decisions. This process can be lengthy, expensive, and stressful at an already difficult time.
Having a personal LPA is unlikely to be enough for business owners because the person you trust to manage your home finances and wellbeing may not be suitable for running your company. Moreover, a personal attorney is obliged to act in your best interests, which may conflict with the needs of your business.
In contrast, registering a business LPA could offer several benefits:
- Keep operations running smoothly – Someone trusted can step in quickly to reduce or avoid disruption.
- Clear roles and decision-making – Everyone knows who can make decisions, helping everyday tasks run smoothly.
- Protect business finances – By reducing the risk of frozen accounts, missed obligations, and reputational damage.
- Peace of mind for you and your team – You and your employees have reassurance that there is a plan in place if something unexpected happens.
As you can see, a well-drafted business-specific LPA offers a valuable safety net that could protect the short- and long-term health of your company.
3 practical steps to take now
If you don’t yet have a business LPA or it’s been a while since you updated yours, here are three steps you could take now:
1. Consider the structure of your business – Your LPA will need to be drafted to fit the way your business is set up and run.
Sole traders – The owner and the business are legally the same. This means that if you lose capacity to make decisions, there may be no one who automatically has the authority to manage the business. As such, a business LPA is crucial to avoid accounts being frozen and operations stalling.
Partnerships – If you have a partnership agreement, this may state what happens if one of you becomes incapacitated, so you’ll need to consider this when drafting your LPA to avoid any conflict.
Limited companies – It’s important to note that an attorney appointed under a business LPA can’t automatically act as director in your place. The LPA governs your shares, allowing an attorney to exercise voting rights. However, you’ll need to review and update the business’s articles of association and shareholders’ agreements to ensure it’s clear what happens if a director loses capacity and to avoid any conflict between these documents and your LPA.
2. Choose suitable attorneys – Identify a person or people who understand your business and the industry it operates in. They’ll need to have the skills, knowledge, and confidence to fill your shoes, potentially for an indefinite period.
Once you’ve identified possible candidates, make sure there are no competing business interests and that they’re free from significant debt. You need to trust your chosen attorneys to run the business as you would, which means their values, vision, and ethical integrity need to align with yours.
3. Seek financial and legal advice – A financial planner can ensure that your business LPA fits with your broader succession plans, without any gaps or conflicts. They’ll also check whether your LPA supports your long-term business goals and coordinate with your solicitor, who will draft the legal document.
Get in touch
If you want to protect your business against the potential disruption and expense that could occur if you lose capacity to make key decisions, we can help.
Our financial planners can help you understand how a business LPA fits with your wider business, succession, and estate planning. We’ll work closely with the solicitor drafting your LPA to ensure it’s tailored to your specific needs.
Email hello@sovereign-ifa.co.uk or call us on 01454 416653.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
The Financial Conduct Authority does not regulate estate planning or Lasting Powers of Attorney.
Approved by Best Practice IFA Group Ltd on: 20/8/26