No one knows when an illness or accident might prevent them from running their business. That is why business owners need to plan what happens to the business in case they cannot run it temporarily or permanently. This article will discuss some legal options, risks that business owners face, and ways to protect their businesses.
Financial Power of Attorney
A financial power of attorney gives someone else the legal authority to manage your finances if you cannot do so yourself. It includes bills payments, handling of investments, and accessing bank accounts. The person you appoint as your financial power of attorney (also called an “agent“) can be a spouse, family member, friend, or professional advisor.
It is important to note that a financial power of attorney does not give the agent the authority to make decisions about your business. You need to create a separate document called a business power of attorney.
Business Power of Attorney
A business power of attorney is similar to a financial power of attorney. Still, it gives the agent the authority to decide your business on your behalf. This could include hiring and firing employees, signing contracts, and managing finances.
As with a financial power of attorney, the person you appoint as your business power of attorney can be a spouse, family member, friend, or professional advisor.
It is important to choose someone you trust to make decisions about your business, as they will have a lot of power and responsibility. You should also discuss your wishes with the person you appoint so that they understand your goals for the business.
Power of Attorney Abuse
Although appointing a power of attorney can be a helpful way to protect your business, it also comes with some risks. One of the most common risks is that the person you appoint may abuse their power and make decisions that are not in your best interest.
You must prevent this from happening. It is important to choose someone you trust and have a detailed discussion about your expectations for the business. You should also keep copies of all important documents and records to monitor the decisions being made on your behalf.
If you have suspicions, proving power of attorney abuse is necessary, and you need legal counsel for this. A lawyer specializing in the intricacies of business and financial power of attorney can help you sort out whether abuse has occurred and gather evidence to prove it. Once you have all the evidence, your lawyer can help you choose from your legal options to act on it.
Business Continuity Plan
Another way to protect your business is to create a business continuity plan. This plan outlines how the business will continue to operate if you cannot manage it.
The plan should include instructions for how the business will be run in your absence and contact information for key employees and suppliers. Having an emergency fund to cover unexpected expenses is also a good idea.
Creating a business continuity plan can be daunting, but many resources are available to help you. You can find templates and guides online or hire a professional consultant to help you create a custom plan.
Business Insurance
It is critical to purchase business insurance that can help cover the costs of damages or losses resulting from business interruptions, accidents, or other unforeseen events. This must include any unforeseen interruptions that stem from your incapacity.
Business insurance policies can vary greatly in terms of coverage, so it is important to understand what is included in your policy. Speak with an insurance broker to find the right policy for your business. You should also review your policy regularly to make sure that it still meets your needs.
Buy-Sell Agreement
A buy-sell agreement is a contract that outlines what happens to a business when an owner dies or becomes incapacitated. The agreement typically stipulates that the business will be sold to a third party or that the remaining owners will have the right to purchase the business.
The agreement can help protect your business by ensuring that it continues to operate even if you are no longer able to do so. It can also help ensure that your family is taken care of financially if something happens to you.
Creating a buy-sell agreement can be a complex process, so it is important to seek legal counsel to help you draft the agreement. You should also have the agreement regularly reviewed to make sure that it still meets your needs.
The Bottom Line
No one knows what the future holds, but there are steps you can take to protect your business in the event that you are unable to manage it yourself. Putting a power of attorney in place, creating a business continuity plan, and purchasing business insurance are all good ways to protect your business. You should also consider creating a buy-sell agreement to ensure that your family is taken care of financially if something happens to you.
