Can an LPA Cover Business Decisions?
Understanding how a Lasting Power of Attorney applies to business owners, partnerships, and company directors.
Written by James Tyrrell · Reviewed by Anthony Dalton · Last reviewed
What would happen to your business if you were suddenly unable to make decisions? For sole traders, everything could grind to a halt overnight. For company directors, the situation is more nuanced — but no less urgent. A Property and Financial Affairs LPA can cover many business decisions, but there are important limitations that every business owner should understand.
At a glance
- A Property and Financial Affairs LPA can cover business decisions for sole traders and partnerships, but an attorney cannot act as a company director
- Sole traders are fully covered because personal and business finances are legally the same
- Under the Companies Act 2006, an attorney can exercise shareholder rights but not director duties
- Partnership agreements should be reviewed alongside the LPA to prevent involuntary dissolution under the Partnership Act 1890
How a Property and Financial Affairs LPA Covers Business Matters
A Property and Financial Affairs LPA gives your attorney broad powers to manage your financial affairs, and this can extend to business matters. The LPA can cover decisions relating to your business interests, including managing business finances, signing contracts, dealing with suppliers and customers, and handling tax affairs.
The extent to which an attorney can act in business matters depends on the type of business structure, the terms of the LPA, and any relevant partnership agreements or company articles of association.
When creating an LPA with business interests in mind, you should include specific instructions or preferences about how you want your business affairs handled. You might specify, for example, that the attorney should consult with a particular business partner or adviser before making significant decisions, or that the business should be sold if you lose capacity permanently.
Sole Traders and Self-Employed Individuals
If you are a sole trader, your business and personal finances are legally the same. This means a Property and Financial Affairs LPA gives your attorney full authority to manage your business, including:
- Managing business bank accounts and cash flow
- Paying suppliers and collecting debts
- Employing or dismissing staff
- Signing contracts on your behalf
- Filing tax returns and dealing with HMRC
- Deciding whether to continue, sell, or close the business
For sole traders, having an LPA in place is particularly important because there is no one else with automatic authority to keep the business running if you lose capacity. Without an LPA, the business could effectively grind to a halt while someone applies to the Court of Protection for deputyship.
Partnerships
If you are a partner in a business partnership, your LPA attorney can generally step into your role and exercise your rights as a partner. However, this is subject to the terms of the partnership agreement.
Many partnership agreements contain provisions about what happens when a partner loses mental capacity. Some agreements may allow the remaining partners to buy out the incapacitated partner's share, while others may allow an attorney to act on the partner's behalf. It is essential to review your partnership agreement and ensure it is compatible with your LPA.
Under the Partnership Act 1890, a partner's mental incapacity can be grounds for dissolving the partnership, unless the partnership agreement provides otherwise. Having an LPA in place, combined with appropriate partnership agreement provisions, can help prevent an involuntary dissolution of the business.
Key point: If you are in a business partnership, review your partnership agreement alongside your LPA to ensure they work together. You may need to update the partnership agreement to explicitly allow an attorney to act on your behalf.
Company Directors and Shareholders
For limited company directors, the situation is more complex. A company is a separate legal entity from its directors, and the role of director involves personal duties and responsibilities that generally cannot be delegated to an attorney.
Under the Companies Act 2006, a director who loses mental capacity may be removed from office depending on the company's articles of association. Many standard articles (including the Model Articles) provide that a director automatically ceases to hold office if they become mentally incapable. An LPA attorney cannot step into the role of director on the donor's behalf.
However, an LPA attorney can exercise the donor's rights as a shareholder. This includes voting at general meetings, receiving dividends, and making decisions about selling shares. For owner-managed companies where the donor is both director and majority shareholder, this distinction is critical — the attorney can use the shareholder powers to appoint new directors and influence the direction of the company, even if they cannot act as director themselves.
To understand more about the financial decisions attorneys can make, including those relating to investments and shares, see our dedicated guide.
Business LPA Planning: Best Practices
If you own a business, there are several steps you can take to ensure your LPA provides the best possible protection:
- Choose the right attorney — select someone who understands your business or is capable of managing business affairs. You might appoint a trusted business colleague as one of your attorneys alongside a family member.
- Include business-specific instructions — use the preferences and instructions sections of the LPA to provide guidance about your business affairs.
- Review existing agreements — check partnership agreements, shareholders' agreements, and articles of association to ensure they are compatible with your LPA.
- Consider key person insurance — this can provide the business with financial protection if you lose capacity.
- Create a business continuity plan — document key processes, contacts, and information that an attorney would need to manage the business.
- Take professional advice — a solicitor who specialises in business law can help ensure your LPA and business structures work together effectively.
What Specific Powers Does an LPA Attorney Have Over a Business?
The powers of an attorney over a business depend on the specific terms of the LPA and the nature of the business. In general terms, the attorney can do anything the donor could do in relation to their financial and property affairs, unless the LPA contains specific restrictions.
This means an attorney could potentially make major decisions such as selling the business, taking on new debt, or entering into significant contracts. If you want to restrict the attorney's powers in relation to your business, you should include clear restrictions in the LPA — for example, requiring the attorney to obtain professional advice before selling the business, or limiting the value of contracts they can enter into without approval.
As with all attorney decisions, the overriding duty is to act in the donor's best interests. When managing business affairs, this means considering not just the financial implications but also the donor's known wishes about the future of the business, the impact on employees, and the long-term interests of the donor and their family.
Business finances often overlap with personal banking. For guidance on managing the donor's accounts, see our guide on how LPAs work with banks.
Creating a well-drafted LPA with clear preferences helps attorneys understand their duties from the start. See how our service works and our pricing.
Key Takeaways
- Sole traders have full coverage — a Property and Financial Affairs LPA gives your attorney complete authority over your business, from paying suppliers to deciding whether to sell or close it
- Company directors face limitations — an attorney cannot serve as director on your behalf, but they can exercise your shareholder voting rights and appoint new directors
- Check your partnership agreement — mental incapacity can trigger dissolution under the Partnership Act 1890 unless the agreement specifically allows an attorney to act
- Include business-specific instructions — use the preferences section of the LPA to give guidance on how your business should be managed, including whether to continue, sell, or wind down
Got Questions? Here Are the Answers
Can an LPA attorney act as a company director on the donor's behalf?
No. Under the Companies Act 2006, the role of company director involves personal duties that cannot be delegated to an attorney. However, the attorney can exercise the donor's rights as a shareholder, including voting and appointing new directors.
Does a Property and Financial Affairs LPA cover business decisions for sole traders?
Yes. Because a sole trader's business and personal finances are legally the same, a Property and Financial Affairs LPA gives the attorney full authority to manage the business, including paying suppliers, signing contracts, and deciding whether to continue or close the business.
Can a partnership be dissolved if a partner loses mental capacity?
Under the Partnership Act 1890, a partner's mental incapacity can be grounds for dissolving the partnership unless the partnership agreement provides otherwise. Having an LPA in place, combined with appropriate partnership agreement provisions, can help prevent involuntary dissolution.
This guide was last reviewed and updated on . Information is based on current legislation and OPG guidance for England and Wales.
Official Guidance
Official resources from GOV.UK
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