As a business owner, you will know how much time, money, and effort you invest in your business.
Having a business continuity plan is essential to enable your business to function and protect those who depend on it if disaster strikes.
A crucial part of your business continuity plan includes having a Lasting Power of Attorney for your business. It means that people you trust will have the legal powers in place for your business to continue if you (or your business partner / co-director) cannot make decisions due to accident or illness.
Without a Lasting Power of Attorney, you will need a deputyship order so that there is legal permission to act on behalf of the incapacitated person. The cost, length of time, and complexity of the process can severely impact the day-to-day running of the business and could ultimately cause it to fail, creating a significant hardship for all those who depend on it.
Having a Lasting Power of Attorney in place for your business avoids these problems and will give you peace of mind.
What are the risks?
Incapacity can be caused in a variety of ways and can be temporary or permanent.
• Strokes happen every 5 minutes. A quarter of stroke patients are of working age. Two- thirds of stroke patients leave hospital with a disability.
• Head injuries happen every 3 minutes. Accidents in the workplace, at home or through sports are common causes of brain injury and can happen to anyone at any age.
• Dementia can happen at any age and also be triggered by head injuries.
What would the impact of incapacity be on your business?
Your bank may freeze your accounts (including joint accounts) with no access granted without a Court order or Lasting Power of Attorney.
In companies, the articles of association will have a list of decisions that directors need to vote on together to agree on contracts, authorise payments and sign off loans. A similar situation applies to business partnerships. For this reason, it is important that if there are multiple business partners or directors that you each have a Lasting Power of Attorney, so there is cover if one or more of you becomes incapacitated.
There is a clause in my articles of association that enables us to remove a director on mental health grounds?’
The Equality Act 2010 prohibits discrimination on the grounds of mental disability and The Mental Health Act 2013 makes it illegal to remove a director on this basis. You could leave your business open to claims if you remove a person on these ground
Estate Planning for Business Owners
Understanding what will happen to your business when you die is essential for you and the people who depend on it. Your business may be one of your most valuable assets.
What happens to my business if I die?
• Sole Trader – Your business is not separate from you as an individual. Any assets used in your business (such as equipment) will go to the beneficiaries of your will or surviving relatives under the rules of intestacy if you do not have a will. You can make a gift of specific assets used in your business if you want a named beneficiary to inherit these.
• Partnership – Unless there is a formal partnership agreement in place, your partnership will automatically dissolve on death. Having a partnership agreement enables clarity over what you and your business partner would like to happen to your shares on death and how this should be valued.
• Limited company – Your business has a legal identity, so it will continue to exist on your death. The articles of association may specify what will happen to the shares of your business. If the articles do not restrict this, you can leave the shares directly to beneficiaries of your will or via a trust. A similar situation applies to Limited Liability Partnerships.