What would happen to your business if you were unexpectedly incapacitated? How long could your company survive if you weren’t there to make the decisions that keep the operation moving? What kinds of calamity might come about even in a short period of time if certain contracts weren’t signed, deals weren’t negotiated, or personnel weren’t hired?
As a business owner, a lot depends on you.
You are responsible not only for the health and profitability of your company, but also the health and wellbeing of the people—family, employees, etc.—who depend on your company for their livelihood, income, and security.
You owe it to them and to yourself to protect your business with a power of attorney (POA) that will enable an appointed agent to take care of business if you become incapacitated.
Without a power of attorney in place for your business, your company could be left high and dry if an illness, accident, or other unfortunate event rendered you unable to manage your affairs. Not only would your company be at risk of running into road blocks that could jeopardize years of hard work, people you care about could also be negatively affected, even in the short term.
Without a power of attorney in place to spell out who is responsible for what, your business partners and family members could find themselves in the messy and potentially costly situation of going through the legal procedure of establishing conservatorship.
The goal of this process is to appoint someone to act on behalf of the incapacitated individual. While it’s a necessary remedy, in cases where preemptive actions have not been taken, it’s definitely not the speediest process, and it can also be emotionally stressful for the people involved as they try to sort out who should be put in control of various decisions. The whole affair can take an extended period of time, during which your business may have to be essentially put on hold.
Rather than waiting for disaster to strike, proactive business owners can work with an experienced attorney to create a detailed business power of attorney. This legal document, similar to a personal power of attorney, appoints specific individuals to manage your business, make decisions, and approve transactions.
In addition to having a “durable” POA, which is effective all the time and empowers the agent to continue acting even after the principal is no longer competent, you can also choose a “springing” durable POA. A springing POA only goes into effect under specific conditions (most commonly upon a physician signing indicating that you lack the capacity to manage your affairs yourself).
Depending on your circumstance, needs, and wishes, you can (and should) tailor your business POA to be as specific as possible to your unique business needs.
Clarity is critical in such a document.
It’s important to really think through who you are appointing, what authority they will have, and when that authority will go into effect.
You can appoint different individuals to handle different parts of your business responsibilities. For instance, you may appoint one person to make day-to-day operational decisions and another to handle big-picture financial or real estate concerns.
People often create two different POAs—one related to business matters and the other related to non-business affairs. In such cases, the individual may choose to appoint two different people to be responsible for these two separate areas.
They key is to get ahead of any crisis by planning ahead and thinking through all these questions.
If you do not already have a business POA in place, give us a call today. One of our estate planning attorneys would be happy to answer your questions and walk you through the process. And if you’re free on Wednesday, join our webinar – you’ll learn the strategies to help you successfully transition out of your business.
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