Thinking about getting a power of attorney for your business? Read on to understand under what circumstances your business might need one.
Life is unpredictable. One moment everything is running smoothly, yet it might all fall apart in the next. What will become of your business if you suddenly become incapable of attending to it? This is when a power of attorney comes to act.
Whether it is for temporary leave or for a permanent issue, having a power of attorney ensures that important decisions making, and signings can occur, even when the owner or owners are not present.
What is a Power of Attorney?
A Power Of Attorney is a document by which you can assign and empower someone to act and make decisions on your behalf when you are unable to do so.
This agent, also known as the attorney-in-fact will get a broad range of power to control and act when necessary, to ensure that the business can continue, even when the owner or owners can not be there.
The extent of power and actions that a person can apply will depend on the terms of the power of attorney, determined by the owner.
You can give broad or limited authority to the attorney-in-fact to make legal decisions about your properties and finances.
If you are physically or mentally incapable of taking your own medical decisions, your power of attorney will make the decision in your place. If you are wondering how to go about the process of getting a Power Of Attorney, you can research online for credible solutions.
Why Do You Need One?
If you have a business and several properties that you have sole ownership of, or you have other partners, you need to do some estate planning. The power of attorney is a part of this planning.
If you are the sole decision-maker of the company or are in partnership with other people with whom you share this power, the absence of even one key person can bring the business to a standstill.
As a key or sole decision-maker, if you get into an accident or any situation that makes you incapable of handling legal affairs, your power of attorney can ensure that the business runs smoothly despite your absence. Your POA works as security, ensuring well-organized supervision and operation of your business, in case something goes wrong.
When Do You Need a POA?
Any business should have a POA because it works as security during such situations.
If you anticipate losing the mental or physical capacity to make sound decisions for the business, you can assign a POA to ensure that someone can handle your affairs in your place.
Even if you feel insecure handing over the power to another person, not having one can hamper your business in case of an emergency.
Remember that you control your power of attorney and have set up the terms and conditions. You can even balance the power distribution among two or more agents, to maximize security. This ensures that decision-making is not monopolized and also works as a backup, in case something happens to the attorney-in-fact.
Even if you are in good health and are not anticipating anything happening to you, it is better to have one, just in case. Life is unpredictable and this ensures that you and your business are prepared if something goes wrong.
What are the Different Types of Power of Attorney?
As mentioned earlier, you set the terms and conditions of your power of attorney. Your POA is a supervisor for your business who will represent you. The following are the different types of Power of Attorneys in existence:
General Power of Attorney
There are many benefits of having an estate plan, such as ensuring the right distribution of property, wealth, and power according to your will, in case of your demise. A general power of attorney is often a part of that estate plan, but it remains in effect as long as you are alive.
By creating a general power of attorney, you give the power to one or more people to make legal decisions about your business’s finances, including signing transactions or paying debts, handling insurance, employing professionals, and operating your business in general.
Your general power of attorney can also have control of your personal properties and can also make medical decisions on your behalf if you grant them that power.
Limited Power of Attorney
If your company has two or three directors and requires signatures from each one of them for decision-making, you should consider granting a limited power of attorney. A limited power of attorney has a restricted power and is only allowed to carry out a limited amount of actions.
For example, if someone goes on vacation or a sabbatical, and their signs are needed to carry out important financial or business transactions, their power of attorney can sign on behalf of them. You might assign a limited POA to handle routine transactions, to ensure smooth operations.
Specific or Specialized Power of Attorneys
Your specific or special power of attorney will be someone you have granted power for specific actions. For example, if you want someone to handle and make decisions for a certain part of your business, you will assign a specialized POA.
According to the POA contract document, they will have specific, clearly defined responsibilities. It is wise to have some specialized power of attorneys when you want to limit their power over your business and resources. If you assign a different POA for a different task, one person will not have total control.
For example, you can choose a Finance POA, who will only be in charge of your finances, or a medical POA who can only make your health care decisions.
Who Should You Choose As Your POA?
The keyword to remember when selecting a POA is TRUST. Only grant a person power of attorney if you are completely sure that you can fully trust them.
Whether it is a friend, family member, business partner, employee, caretaker, etc. make certain that they are worthy of your trust.
Every business should consider having power of attorney to ensure the smooth sailing of business and operations. This especially applies for sole or partnership businesses, where control lies with only a handful of people.
Set the terms of your POA as you wish and only grant someone this power if you fully trust them.
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