Individual Advice for Business Owners
At Whitehead Monckton we are experienced in acting for clients from a wide range of sectors and industries, often in conjunction with our corporate department. We offer specialist succession planning advice to entrepreneurs, business owners and company directors.
Every individual should make sure they take the time to plan for the future, whether that is with life cover, a pension, a Will or a lasting power of attorney. When advising business owners we tailor our advice to address the particular needs and requirements of this type of client. In this article I am going to talk about two different aspects of this advice, and how we can help you plan for your business future.
Mental Capacity and Your Business
If a shareholder/director/partner suffers from a loss of mental capacity this could be disastrous for a business unless there are the necessary safeguards in place for such an eventuality. What would happen in your business if you were unable to make decisions? Would someone else be able to authorise payments or enter into contracts and keep the business running? If not, this could have consequences for the smooth running of your business and its long-term reputation as well as financial consequences for you and your family personally.
To safeguard against this loss of business continuity, consider the creation of Lasting Powers of Attorney. You can ensure that you have in place the necessary documentation to enable your chosen attorney(s) to step into your shoes if you are incapacitated, either permanently or temporarily, and keep your business going. It may not be appropriate for this chosen individual(s) to be your relatives, to whom you may be happy to entrust your personal financial decision making authority, and so separate business financial LPAs may be beneficial.
If you have lost mental capacity without making valid LPAs, then your business partner or family member will need to apply to the Court of Protection to be appointed as Deputy to be able to act on your behalf; an expensive and time consuming process, and you are not then in control of whom this responsibility is entrusted to.
You do not want to run the risk that your business will be paralysed without anyone able to make the decisions necessary to keep it running smoothly and profitably, and so the consideration of business financial LPAs is always a good idea, and someone involved in the business, or who knows how your particular sector operates may be better placed than family members to be appointed.
If you do decide you need separate personal and business LPAs then we would include specific wording in the business LPAs to make it clear that your business attorneys only have the authority to use your business accounts and make decisions relating to your professional role. Your attorneys under this LPA are not permitted to use your personal accounts or to make decisions about your personal property and finances, in respect of which you will have executed a separate LPA.
Your personal financial LPA would include wording to the effect that your attorneys will have general authority to act in relation to all your property and affairs except any decisions relating to your business, your business accounts and your professional role.
It can also be a good idea to prepare a side letter accompanying your LPAs, providing guidance to your business attorneys as to how you would want them to undertake their role, to assist them in making decisions if you are unable to do so.
Succession Planning and Your Business
We talk about Succession Planning all the time in relation to planning for clients’ personal estates, and you should do the same for your business interests. Do you want to retire, handing the reins of your company over to your children, ensuring the smooth future success of your lifetime’s work?
It is never too early to start planning and take professional legal, accountancy and financial advice. What would the impact of your death on your business be? When a founder entrepreneur loses capacity or dies, the business often suffers from a loss of revenue and increased chances of failure.
The most important factor in successful business succession planning is communication. Talk to your professional advisors about what you want and include family members in your planning and objectives for the future. Expecting children who to date have not been involved in, or part of a company, to be able to keep it going on the death of the business founder, is unrealistic.
You can explore the various options available to undertake succession planning for your business at the same time as considering your personal succession planning, as the two are often enmeshed. Do you want to start including family members in your business, helping them to understand your vision and enthusiasm for the business, so they are better placed to take over in the future? When making your Will, consider your business interests, both from a taxation perspective, and the most efficient way of holding them and passing them down the generations, as well as looking to the future ownership/control of your business, though corporate advice on share classes and company appointments.
If you want advice on Lasting Powers of Attorney and Succession Planning for your personal and business interests then please get in touch and we will be happy to talk to you further about our range of Succession Planning services.