People often talk about Powers of Attorney (PoAs) in the context of planning for retirement or old age. But if you are a sole trader or run a small business, putting in place a Power of Attorney could be critical to the wellbeing and survival of your business if you suffer health or incapacity problems.
All that’s involved is a straightforward legal document saying who would run the business if you could not do it yourself. This could avoid a lot of stress as well as saving time and money down the line.
Let’s suppose you are a sole trader, you fall off the proverbial ladder, and become incapable of running the business or your own affairs. This could be for a month or two, or longer.
If the business accounts are in your name only, and you have no PoA in place, no one else would be able to access them or run your business. Yet, there would still be bills and suppliers to pay, customers to serve, tax returns to file, and so on. This could be devastating for your business, its credit history, reputation, and customer relationships, as well as for any dependants relying on your income.
Any family member or friend who wanted to step in to run the business would have to apply to court for Guardianship, which is expensive and slow. Currently, in East Lothian, for example, guardianship applications can take up to a year.
Arranging a PoA could prevent such a situation poleaxing your business, and is easy to do. There are a few things to note, including:
- PoAs can apply to people’s financial affairs and/or welfare. Only the former type applies to a business.
- You don’t have to appoint the same attorney to handle your business affairs and personal affairs – different people may be better suited for each task.
- With a partnership or company, you must ensure the PoA doesn’t conflict with other arrangements, such as the terms of the articles of association. Advice is important here.
Finally, if disaster does strike and you do not have a PoA in place, it is essential for your family or partners to take immediate advice on obtaining Guardianship. They must not let the stress of the situation delay them from doing this.
