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What’s a Business LPA and why might you need one?


Have you considered what would happen to your business should you become unable to make decisions about how it’s run and its finances?

The answer could be a business LPA.

If you have a Lasting Power of Attorney in place, intended to cover your personal affairs, it’s important to consider whether your chosen attorney(s) is capable of making decisions for your business also.

A family member or friend may not be knowledgeable enough to deal with business matters, therefore making a separate LPA for your business is advised.

For example, would they be able to deal with paying the business’s outgoings, managing staff or agreeing a sale of the business should this become necessary?

Business LPAs allow the donor (business owner) to appoint a suitable attorney to make decisions concerning their business interests when they are unavailable or lack mental capacity.

Some businesses have undergone crisis management – identifying and preparing for probable risks such as floods, computer hacks or theft. Fewer businesses consider preparations for significant decision-makers becoming incapacitated.

“Making an LPA for your business affairs can help protect your interests, and those of your business, in the event that you become mentally incapacitated through illness of accident.”

Do you need a Business LPA?

Whether you are a sole trader, director of a limited company or in a partnership, it is important to consider preparing an LPA to cover your business affairs.

Sole Traders

If you are a sole trader, it is likely that the business is owned and controlled by you. Whilst you may have an understanding amongst your employees or close friends and relatives of what would happen should illness or injury take you away from the business, in the eyes of the law this isn’t sufficient.

Without an LPA in place they will be unable to continue to deal with fundamental business affairs such as accessing bank accounts, paying suppliers and salaries and fulfilling contracts.

The absence of a separate legal entity means that preparing a business LPA is an effective way for you to make provision for the continuity of your business, in the event that you are incapacitated.


If you run your business as a partnership, you may have a partnership agreement in place which includes provision for what would happen if you or your partner(s) became incapacitated.

The vast majority of partnerships do not have a partnership agreement at all, and if they do, they do not make provision for incapacity of one of the partners.

It is important to ensure that any LPAs do not conflict with the terms of the partnership agreement (if there is one!).

It will be necessary to review these agreements regularly as a change in the law with the addition of the Mental Health (Discrimination) Act 2013 means that certain clauses in relation to incapacity will no longer be valid.

Limited companies

If you are a director of a limited company, the company’s Articles of Association (or Model Articles) may contain provisions for what would happen if a director became incapacitated.

If you are the sole director of the company then the Articles of Association are unlikely to make provision for this otherwise there would be no one else to continue running the company.

However, as above, it is important to review these regularly to ensure that they remain fit for purpose and effective.

Directors may also own shares in the company or even be the majority shareholder. This can cause additional problems if you do not have an LPA in place as any decisions regarding shareholder approval cannot be made. The terms of a shareholders’ agreement should also be considered.

For Frequently Asked Questions about Business LPAs, contact us on 01284 701131 or download our Business LPA Factsheet.