Why business owners should consider a Lasting Power of Attorney

An “LPA”, is a legal document made in advance of someone losing mental capacity. It gives another person, or people, known as attorney(s), authority to make decisions on their behalf.

There are two types of LPA:

• A property and financial affairs LPA, which allows your attorney(s) to deal with your property and finances as you specify; and
• A health and welfare LPA which allows your attorney(s) to make health and welfare decisions on your behalf, only when you lack mental capacity to do so yourself.

As a business owner, it is important to consider what would happen to your business if you were unable to make decisions. Would someone else be able to keep the business running? Who would maintain operations and make decisions in the best interests of you and your business?

How you can protect your interests, and those of your business, will depend on your business structure.

Sole traders

If you are a sole trader, your business is not regarded as a separate legal entity from you. If you lose mental capacity, there is no one automatically authorised to manage your business affairs. Appointing an attorney under an LPA can be an effective way to support the continuity of your business.

Partnerships

Partnerships will be subject to the terms of any partnership agreement and the relevant legislation. Your partnership agreement may already include provisions dealing with the loss of mental capacity by one of the partners, in which case an LPA may be unnecessary.

However, if you are in doubt or think an LPA may be required, you should seek advice on the wording of the LPA to ensure it does not conflict with any existing provisions.

Companies

A director’s appointment is personal and can only be discharged by the person holding that office. It cannot be delegated to an attorney.

Directors should therefore review the company’s articles of association, as these often include provisions for ending a director’s appointment on loss of mental capacity to protect the business. If this is not covered, the company should consider whether the articles should be updated to include bespoke provisions for these circumstances.

Although an attorney cannot act for an individual director in that capacity, they can act on behalf of a shareholder. Shareholder decisions are often key to the company’s direction and organisation. For a sole or majority shareholder, an LPA can therefore be especially important, as it can help ensure resolutions can still be passed.

Again, it is important to check the company’s articles of association, as well as the terms of any shareholders’ agreement, to confirm there are not any pre-existing provisions that would prevent an attorney acting on behalf of a shareholder.

How do I choose my attorneys?

Selecting business attorneys requires careful consideration of their experience, skills and ability to take on the responsibility. While family members may be suitable to manage personal assets, they may not always be best placed to make business decisions. Business attorneys should have the right strategic and technical expertise, so appointing individuals with complementary backgrounds can be beneficial.

One LPA or two?

While it is possible to appoint attorneys to manage both your personal and business assets under one LPA, it may not be appropriate for the same person to make both types of decision, as this could create a conflict of interest. Instead, you could make separate LPAs: one for your personal property and financial affairs, and a second dealing with your business interests. Each LPA would include clear instructions limiting the attorney’s powers to the relevant area and would run concurrently.

What if I don’t make a business LPA?

If you have made an LPA covering all your property and finances, your appointed attorneys will be able to deal with your business interests, but they may not be best placed to make decisions about your business.

If you lose decision-making capacity without an LPA in place, the Court of Protection may need to appoint a deputy to act for you. This process can be costly and there is no guarantee the Court will choose the same person you would have chosen. It can also take more than six months to appoint someone, leaving your business exposed during that period.

Conclusion

In summary, making a business LPA should form part of a business owner’s continuity planning and crisis management strategy. Every case will be different, so it is important to take advice that reflects your personal and business circumstances. Get in touch with our team of experts to find out more.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at November 2026. For more information see our terms & conditions.