In an era of uncertainty, it's important to plan ahead with a Business Power of Attorney
Your business is running smoothly for years and you are thinking of retiring. But then the unimaginable happens. You have a health event that leaves you unable to operate your business. Unfortunately, there are several initiatives at work that must be completed. Suddenly, you are mugged by reality - you are the only one that has the power to accomplish these and other tasks related to your business.
This is a typical situation where a Business Power of Attorney would be a crucial document to continue operations of your business when you are unable. This document - much like other powers of attorney – is created as follows: You, as the Principal, name another person, the Agent, to perform certain actions and decisions on your behalf concerning your company.
For example, the Agent’s actions or powers can include the power to enter into contracts, handle investments of the business, enter into transactions with financial institutions, sign tax returns and generally make all decisions concerning the conduct of your business. In the alternative, you might want to use a Limited Business Power of Attorney that grants only certain powers to the agent such as the ability to sign contracts or to sell a specific asset.
In addition, you can also include a certain event when the document becomes effective. You can state that it would not take effect until ” I become unable to manage the business affairs of my company as opined by my treating physician” or when “I decide to transfer those above powers to the Agent”. You can also include an ending date such as when” I become able to manage the affairs of my business as determined by my treating physician.” You may prefer that the document to be effective upon execution and not terminate until his or her demise, so it is ready should and unfortunate event befalls you.
Consequently, you should be careful when naming your Agent. You should name someone that you trust, knows your business thoroughly and will carry out the strategic vision for your enterprise. Remember, your Agent is a fiduciary; thus, the Agent must perform the duties on your behalf as the owner. The lurking devil is the possibility that the Agent acts on behalf of his own interest, not yours. Obviously, the trust factor is huge.
Finally, what if you do not have a Business Power of Attorney in place? If this is the case, the Agent under your regular Power of Attorney for Property would handle your business affairs. This may or may not be the person that you would have chosen. If you do not have any Powers of Attorney for Property in place, then the Probate Court in the county in which you reside would name a guardian for your estate. Again, this may not be the appropriate person to steer your company. Guardianship is complicated, expensive and time consuming. You should avoid this byzantine process at all costs.
Hopefully, this scenario will never come to pass for you. But in this era of uncertainty, it is wise to plan ahead for your business even for those improbable events. The Business Power of Attorney may assist you in this planning and give you the peace of mind that you have inserted some degree of continuity for your business should the unthinkable happen.
Bill Wilson, Partner