We know running a small firm means you wear many hats. An LPA lets you appoint someone you trust to act if you can’t. This is practical planning that keeps your operation running with minimal disruption.
Think of it like insurance against the unexpected. When you sign contracts, authorise payments and keep daily work moving, a correctly chosen agent can step in and help preserve income and reputation.
This guide explains the key differences between an LPA and an ordinary power attorney. We will show how to choose the right person, how to register an LPA, and why getting tailored legal advice can matter.
We’ll also cover how family finances tie into business affairs. Many owner-managed firms mix household and trade money. Good planning protects both.
Key Takeaways
- An LPA allows someone trusted to make decisions if you cannot.
- It supports continuity and reduces disruption to trading.
- Choose an agent who understands your business and values.
- Registering correctly is essential to avoid delays.
- Seek advice when finances overlap between home and company.
Why business owners in the UK need a power of attorney for continuity planning
A sudden illness or accident can leave a firm without anyone authorised to act, and that gap can cost weeks or months in lost trade.
If the person who normally signs paperwork becomes unable to act, banks may freeze accounts. Suppliers can stop deliveries and payroll can miss its run. These are immediate risks that hit cashflow first.
There is a difference between being physically unavailable—such as being in hospital or abroad—and lacking mental capacity. Both situations can halt routine tasks and harm reputation.
Common triggers and practical effects
- Stroke, brain injury, coma, dementia or sudden illness can remove someone from their role at any time.
- Missed payments, late payroll, penalties, unhappy customers and breached contract deadlines stack up quickly.
- Without prior authority, the Court of Protection may have to appoint a deputy. That route is slow, costly and restrictive.
Putting authority in place lets a trusted person step in quickly. That keeps trading running and avoids the lengthy delays and disruption that court intervention can cause.
| Situation | Without an LPA | With an LPA |
|---|---|---|
| Authorising payments | Bank may freeze accounts pending proof of authority | Appointed person can authorise payments promptly |
| Managing payroll | Staff may be unpaid; morale and retention suffer | Payroll continues with minimal disruption |
| Contractual commitments | Deadlines missed; penalties or claims possible | Contracts can be signed and obligations met |
| Legal route if capacity lost | Court of Protection deputy appointment takes many months | Registered arrangement avoids court delay and extra cost |
Understanding LPAs vs Ordinary Power of Attorney for business decisions
Deciding who can act and when starts with understanding two distinct legal arrangements.
Lasting arrangements are for long-term protection. A lasting power attorney is a formal legal document. It must be registered before anyone can use it. Once registered, it can operate immediately or only if you lose mental capacity under the Mental Capacity Act.
How a lasting arrangement works after registration
An lpa can be restricted so it only starts on confirmed loss of capacity. Examples include dementia, stroke, brain injury or coma. This reassures people who do not want others acting while they remain capable.
Short-term delegation for defined periods
An ordinary power attorney is useful for a set time. Think of a long trip abroad or a short illness. It gives someone authority to sign and pay while you are temporarily unavailable.
Getting the scope right
- Too vague: may cause bank or supplier delays.
- Too broad: may expose you to unnecessary risk.
- Right scope: clearly states who can sign, pay and manage at specified times.
| Type | When it applies | Best use |
|---|---|---|
| Lasting arrangement | After registration; can be immediate or on loss of capacity | Long-term protection for ongoing affairs |
| Ordinary arrangement | Specified short period | Temporary absence, travel or short illness |
| Restricted LPA | Only if capacity is lost under the Act | Reassures donors who want a safeguard |
power of attorney for business decisions for sole traders uk
When a sole trader can’t act, day-to-day tasks quickly stall because there is often no formal authority in place. That gap creates immediate risk to trading and to family finances.
Why sole traders are uniquely exposed
There is no separate company to step in. Helpful friends or family may assist, but they rarely have legal standing to access accounts or sign contracts.
Day-to-day risks: invoices, payroll, suppliers and bank access
- Invoices go unpaid and cashflow dries up.
- Payroll may miss its run, harming staff morale.
- Supplier payments lapse and deliveries stop.
- Access to the bank can be blocked without formal paperwork.
Debt, bankruptcy risk and protecting personal finances
Many sole traders mix trading and personal accounts. Debt can mount fast and push personal finances toward insolvency.
“A correctly drafted power and trusted attorney keep trade moving and limit avoidable debt.”
We’ll explain next how to choose what powers to grant so you can protect business affairs and reduce risk.
What to do if you’re a company director or shareholder
Start by reading your articles. They often set out what happens if a director loses capacity. Some articles association clauses end a director’s appointment automatically. That can leave the company stuck.
How the articles may deal with incapacity
Many articles association include clear steps. They may require medical evidence or a board vote. Check them early. Amendments can be made while you still have capacity.
Sole director risks
A sole director who is removed or unable to act can leave a company with no one to sign or run day-to-day tasks. This is high risk. Consider adding a named replacement in the articles.
Preserving shareholder rights
If a main shareholder cannot vote, an attorney authorised to exercise shareholder rights can appoint or replace directors. Ensure any voting steps are documented and valid.
Limits on delegation and why legal advice matters
A director cannot lawfully delegate every duty. Some responsibilities remain personal. We recommend getting legal advice when governance is complex. Poor planning risks disputes and invalid decisions.
| Issue | No provision in articles | Provision present |
|---|---|---|
| Director removed for incapacity | Company may lack decision-maker | Succession steps trigger automatically |
| Sole director scenario | Operations can stall | Named deputy or shareholder power fills gap |
| Shareholder voting | Votes may be impossible if incapacitated | Appointed attorney can exercise voting rights |
If you need a clear next step, read your articles and seek tailored advice on appointing an attorney. We can help you check documents and reduce future risk.
Partnerships and business agreements that may reduce the need for an LPA
Before drafting extra documents, check whether your partnership contract already covers incapacity. A well-drafted agreement can keep trading smooth and avoid extra paperwork.
Look for clear clauses that address incapacity, decision-making authority, banking access and signing rights. Check how profit share and duties are handled when a partner is absent.
When the agreement helps
Many partnerships are better protected than sole operators because an agreement can already put arrangements in place. This reduces the immediate need to create an LPA.
When it may not be enough
Even where a clause exists, it can be silent on practical matters such as who pays suppliers, signs contracts or speaks to the bank and key clients. Gaps can still cause delays and risk to trading.
- Check clause detail: incapacity tests, how decisions are made, and who has authority to act.
- Review currency: is the document up to date with current law and how you actually run the firm?
- Plan continuity: name deputies, confirm banking mandates and record signing rules.
“Even a well-meant clause can fail if it does not cover everyday practical steps.”
If you are unsure, take legal advice. Small wording issues can have big consequences. Even with a partnership agreement in place, you may still need the right person and the right formal powers. Read our business lasting LPA guidance to help decide next steps.
Choosing the right attorney for business affairs
Picking the right person to act on your behalf is as much about competence as it is about trust.
Trust, competence and understanding matter. Choose someone who knows your trading routines, suppliers and payroll. That reduces delay and keeps customers satisfied.
Who can act
An attorney can be a family member, a close friend or a professional, such as a solicitor. Professionals help where matters are complex or family ties make choices hard.
Eligibility checks
Don’t appoint anyone who is bankrupt or subject to a debt relief order. These rules prevent them from acting.
Replacements and how they act
Appoint replacement attorneys in case your first choice cannot act. Decide whether to require all to sign (jointly) or allow single action (jointly and severally). Joint decisions give control. Jointly and severally give speed.
Conflicts of interest
Be cautious if a director or close colleague will act. Conflicts can arise where decisions affect their own position. We can help you weigh risks and give clear advice.
- Three essentials: trust, skill, commercial sense.
- Check eligibility and name backups.
- Choose signing rules to suit your firm’s pace.
“Choosing the right person is as important as the paperwork.”
Read practical guidance on appointing multiple deputies at appoint replacement attorneys.
Deciding what powers your attorney should have over your business
A well-scoped mandate lets a trusted person act fast while protecting your long-term interests.
Start by listing the practical tasks you want covered. This keeps daily trading steady and avoids urgent calls to the court.
Banking and finances
Allow access to accounts only as needed. Name the accounts and state if payroll must continue automatically.
Specify limits on spending and whether the appointee can pay creditors or move funds between company and personal accounts.
Contracts and operations
Be clear about signing authority. State which documents they may sign and which need extra approval.
This prevents suppliers or clients refusing to accept signatures and keeps trading activity going.
Strategic decisions
Deciding to sell, merge or acquire is a big step. Many owners require extra safeguards here.
We suggest requiring a second signatory, a board resolution, or explicit written consent before major transactions proceed.
Reputation and stakeholder management
Give guidance on communications with staff, clients, lenders and landlords. A calm, timely message protects relationships.
Record who may speak publicly and who must be notified first, so reputation risks are managed.
- Practical tip: be specific—named accounts, capped sums and listed contracts reduce later challenges.
- Keep continuity simple: routine finances and documents should be handled without delay.
- Safeguard strategy: require extra steps for selling or using significant capital.
For a clear template and further detail on assigning these powers, read our guide on business powers.
How to make and register a business lasting power attorney in the UK
Begin by gathering the key details you want the document to cover, then draft clearly so registration is straightforward.
Prepare the scope carefully. Name the accounts, list contracts and set spending limits. Vague wording or conflicting clauses can lead to rejection at registration.
Complete the correct form in order. LPAs follow a strict layout. Filling sections out of sequence or missing a signature creates delays. Use the official form and follow the guidance notes.
Registering with the Office of the Public Guardian
Send the finished documents to the Office of the Public Guardian. Registration is required before the LPA can be used.
Expect the process to take time. Registration can take up to around 20 weeks. Don’t leave this until an emergency.
When the arrangement can be used and how restrictions work
An LPA comes into effect once registered. You can choose a lasting power that only starts if you lose capacity under the Mental Capacity Act.
This restriction gives extra reassurance. It also limits immediate access while you remain capable.
Separate documents for company affairs and personal matters
We often recommend separate LPAs for trading affairs and for personal finances and property. That reduces confusion and conflicts of interest.
If the business is complex, get professional help. A well-drafted LPA should work under pressure, not just look correct on paper.
Conclusion
Act now, planning ahead gives a named person the legal right to keep everyday work moving.
In short: the right LPA or short-term arrangement helps ensure business continuity if you can’t act.
Do nothing and you risk frozen accounts, missed payments, lost contracts and the delay and cost of a Court of Protection deputyship.
Choose the right type, appoint a trusted agent, set clear limits and register in good time. Seek professional advice where directors, shareholders or conflicts exist.
Start by reviewing your structure and articles or partnership terms. For practical steps on protecting accounts, see our guide to secure your bank accounts.