Business owners need to know what would happen if they lost the capacity to make decisions. Find out how a business power of attorney can help.

An LPA, then, prepares for the worst. Like many types of insurance, it can feel morbid to contemplate a time when you lack the mental capacity to make decisions. But the alternative is that the company you've worked so hard to keep afloat goes under.

Less dramatically, an LPA can be used in the short term. You can delegate responsibility whenever you need to. This can be used for short-term crises but also to afford you the freedom to step back from the company when you need to.

Can all business owners benefit?

When it comes to LPAs, there are distinctions to be drawn between different types of business.

LPAs can be highly beneficial if you're a sole trader, in a partnership or the director of a small limited company.

However, an LPA may not be possible if you're the director of a large limited company. This is because your company's articles of association may already cover disaster planning.

That said, a personal financial LPA could be beneficial. This would allow you to appoint an attorney to vote on your behalf.

What is a professional attorney?

One option is to appoint a "professional attorney". This could be an accountant, solicitor or other professional.

This can be a sensible option if none of your relatives or friends are suitable for the role. It can be especially beneficial if you yourself are in the legal profession.

How long does it take?

A business LPA has to be registered with the Office of the Public Guardian before it's enforceable. This can take up to ten weeks.

On top of this, the LPA has to be written. This is a complex process that requires legal advice – so you need to factor that in when deciding on the "right time" to act.

Do you need multiple PoAs?

The short answer is that it depends.

If you're a sole trader or in a partnership then your personal and business affairs are closely linked. It might, therefore, make sense for your personal attorney to also take care of business should you lose capacity.

However, the head of a limited company may want there to be a separation of personal and business affairs.

This would mean two LPAs – one for your health care and personal finances, one for your business affairs.

Sometimes, it's not a matter of choice. If your personal LPA does double duty, there may be a conflict of interest or confusion of roles. In this eventuality, the Office of the Public Guardian will reject the application.

How a solicitor can help

Business LPAs aren't off-the-shelf documents that simply need to be filled in and signed. They have to be written with close attention to your specific personal affairs and the complexities of commercial and employment law.