A simple Plan B for business owners and sole traders

Covid-19 has been a wake-up call for business owners to plan for the unexpected. 

Some simple legal planning could protect their business in the event of illness or accidents

As businesses try to return to ‘normal’ after the havoc of the past two years, the last thing they want is any further derailments. And one lesson of the coronavirus pandemic is the critical need for business owners to have their personal affairs in order.

One key aspect of this is making contingency plans in case they fall ill or become incapacitated. After all, 2020 taught all of us that the unthinkable really can happen.

‘What if’ preparations are critical

Let’s take the example of a sole trader or someone who runs a small business. If they were suddenly incapacitated by a serious illness or injury, they would still need someone to pay suppliers, manage the bank account, deal with contracts or insurance or file VAT returns.

Many people assume that a partner, family member or business colleague could quickly take up the reins. In reality, this may not be the case.

Key example: the business bank account

If the business bank accounts were only in the owner’s name, no one else would be able to take over managing the finances. They would have to apply to the courts for a ‘Guardianship’, a process that can take six months or more. This could be catastrophic for the company’s credit record, business relations and reputation, and in turn for the family finances.

There’s a simple solution, however. It’s a business Power of Attorney (PoA), and we explain the key details below.

The business Power of Attorney

• A business PoA is similar to a personal one. You nominate one or more people to make decisions and act on your behalf including managing your business while you are unable to do so.
• Your business ‘attorney’ doesn’t have to be the same person as your personal attorney. They may have to liaise with each other, though, so you’ll want the relationship to be smooth.
• How the business PoA is set up depends on whether you operate as a sole trader or have a company or partnership; with these last two, there may already be some provisions for what happens if someone becomes incapacitated. A solicitor can tailor the PoA to cater for this and also for your own business and family.
• The issue of PoAs is just one example of how the personal and the commercial can’t be treated in isolation. Life events from divorce to someone dying without a Will could affect the future of your business or lead to large legal and accountancy bills. Planning ahead and some simple legal advice can minimise the risks.