You are the key to your business’ success. The company’s vision, strategy and day-to-day operations all come back to you. If you were to not show up for a week, with no communication and no explanation, what would happen?
It’s a bit of a terrifying thought, but it underscores why every business owner needs a power of attorney.
What a power of attorney does
A power of attorney is not a person, but a legal document. This legal document authorizes a person to make key decisions on your behalf should you suddenly be unable to do so yourself. What this means is, if you suffer a serious injury in an accident, or become seriously ill, or for some other reason can no longer handle your affairs, this other individual will step in.
What this helps ensure is that your business can continue operating without interruption even while you’re away. Without a power of attorney, it’s likely nobody will immediately be able to make important decisions about your business. This could result in responsibilities such as payroll or vendor payments coming to a halt. If the business’ operating agreement requires your input on certain decisions, your fellow business leaders might find themselves stuck in limbo during your absence.
It also provides your family and colleagues certainty and direction, without having to rely on a court to slowly come up with answers.
Defining an agent’s powers
The person whom you choose to act on your behalf is often referred to as the agent. It can be anyone, from a family member or friend, to a trusted work colleague. That’s up to you.
It’s also important to know this person does not get free reign. You can clearly define the scope of the agent’s powers. That may include allowing them to:
- Operate the business
- Enter into contracts
- Take care of financial transactions, such as with a bank or investments
- Address legal concerns, including by hiring an attorney
- Buy or sell property
You can also state a clear beginning and end date. For example, you may specify that this agent only has these powers from the day you are in the hospital to the day you are discharged.
Part of running a successful business is creating a legacy, one that supports yourself and your family not just now, but long into the future. It’s important to prepare for all possible scenarios by putting the company in a position to progress no matter what happens.