LPAs for Business Owners: Why Your Business Needs One
Without an LPA, losing mental capacity could shut your business down overnight. Here’s how to prevent that.
Written by James Tyrrell · Reviewed by Anthony Dalton · Last reviewed
Imagine waking up tomorrow unable to sign a cheque, approve a supplier payment, or make a single decision about the company you spent years building. That’s the reality for business owners who lose mental capacity without a Lasting Power of Attorney in place. Whether you’re a sole trader, a partner, or a company director, an LPA is one of the most important pieces of business continuity planning you can do — and one of the most overlooked.
At a glance
- Without an LPA, no one has legal authority to run your business if you lose mental capacity
- For sole traders, the attorney can manage the entire business; for limited companies, the attorney can exercise shareholder rights but cannot act as director
- A partner's incapacity without an LPA can trigger involuntary dissolution of a partnership under the Partnership Act 1890
- Registering an LPA costs £92 vs £1,000–£3,000+ for Court of Protection deputyship
Why Business Owners Specifically Need an LPA
Everyone should consider making a Property and Financial Affairs LPA, but business owners have far more at stake than most. If you’re employed and lose capacity, your salary keeps coming in. Your employer handles everything. But if you run a business, there may be no one with legal authority to keep it going.
Staff still need paying. Suppliers still need invoicing. Clients still need servicing. Contracts still need signing. Without an LPA, all of this stops — and the damage can become irreversible within weeks, not months.
Under the Mental Capacity Act 2005, nobody — not your spouse, not your business partner, not your accountant — has automatic authority to step in and manage your business affairs. The only routes are a registered LPA or a court-appointed deputy.
Key point: An LPA costs £92 to register with the Office of the Public Guardian. Without one, a deputyship application through the Court of Protection can cost £1,000–£3,000+ and take months — time your business may not have.
Sole Traders: What Happens Without an LPA
If you’re a sole trader, you are the business. There is no legal separation between your personal finances and your business finances. That simplicity is an advantage in normal times, but it becomes a serious vulnerability if you lose mental capacity.
Take someone like David, a self-employed electrician with three employees, a van on finance, and regular contracts with local builders. If David suffers a stroke and can’t manage his affairs, here’s what happens:
- His business bank account is effectively frozen — nobody else can authorise payments
- Staff can’t be paid, and no one has authority to manage employment matters
- Outstanding invoices go uncollected
- Contracts lapse, and clients move on to other tradespeople
- The van finance still needs paying, but nobody can access the account
- HMRC obligations — VAT returns, self-assessment — go unmet
With a Property and Financial Affairs LPA, David’s named attorney could step in immediately. They could pay staff, manage contracts, collect debts, deal with HMRC, and decide whether to keep the business running or wind it down — all while acting in David’s best interests.
Partnerships and the Dissolution Risk
Partnerships face a unique and often overlooked danger. Under the Partnership Act 1890, a partner’s mental incapacity can be grounds for dissolving the entire partnership. That’s not a theoretical risk — it’s the legal default.
Consider Sarah and Rachel, who run an architecture practice together. If Sarah loses capacity and there’s no partnership agreement that addresses incapacity, Rachel could be forced to dissolve the business entirely. Years of goodwill, client relationships, and ongoing projects — all at risk.
An LPA alone doesn’t solve this completely. You also need your partnership agreement to explicitly allow an attorney to act on an incapacitated partner’s behalf. The two documents need to work together. What catches people out is assuming one covers the other.
With an LPA + Updated Agreement
Your attorney can exercise your partnership rights, participate in decisions, and prevent involuntary dissolution. The business continues operating.
Without an LPA
The partnership may be dissolved under the Partnership Act 1890. Your partner could be forced to wind up the business, even if that’s the last thing anyone wants.
Limited Companies: Directors and Shareholders
Limited companies add another layer of complexity. Under the Companies Act 2006, a director’s role involves personal duties and fiduciary responsibilities that cannot be delegated. Your attorney cannot simply step into your shoes as a director.
In practice, many companies’ articles of association (including the Model Articles) state that a director automatically ceases to hold office if they lose mental capacity. So the directorship effectively ends.
That said, there’s a crucial distinction here. While the attorney cannot be a director, they can exercise all of the donor’s shareholder rights. For owner-managed businesses where you’re both director and majority shareholder, this matters enormously. Your attorney can:
- Vote at general meetings using your shares
- Appoint new directors to replace you
- Receive dividends on your behalf
- Make decisions about selling or transferring shares
- Influence the strategic direction of the company
For a deeper look at how LPAs interact with business structures, see our guide on whether an LPA can cover business decisions.
Choosing a Business-Savvy Attorney
Picking the right attorney is always important, but for business owners it’s critical. Your spouse might be the obvious choice for personal financial matters, but are they the right person to manage a trading business, negotiate with suppliers, or make decisions about staff?
Many business owners appoint multiple attorneys — a family member for personal affairs, and a trusted colleague, business partner, or professional adviser for business matters. You can appoint attorneys to act jointly and severally, which gives each one independent authority, or set specific conditions about who handles what.
When choosing your attorney, consider:
- Commercial awareness — do they understand how your business works day to day?
- Decision-making ability — can they make tough calls under pressure, like letting staff go or closing a contract?
- Trustworthiness — will they genuinely act in your best interests, not their own?
- Availability — can they step in at short notice if needed?
- Professional relationships — do they know your accountant, solicitor, and key contacts?
Including Business-Specific Instructions in Your LPA
The LPA form includes sections for both preferences (guidance your attorney should follow where possible) and instructions (legally binding requirements they must follow). For business owners, this is where you can give your attorney real direction.
Examples of business-specific instructions might include:
- The business should continue trading for at least six months before any sale is considered
- The attorney must consult with your accountant before making financial decisions above a certain value
- A named person should be offered first refusal if the business is sold
- Staff redundancies require consultation with your solicitor
- Specific clients or contracts that must be prioritised
Worth knowing: instructions are binding, but overly restrictive instructions can make it impossible for your attorney to act effectively. Strike a balance between giving guidance and allowing flexibility. Your attorney still has a legal duty to act in your best interests under the Mental Capacity Act 2005.
Business Continuity Planning Alongside an LPA
An LPA gives your attorney the legal authority to act, but it doesn’t give them the knowledge they need to run your business. That’s where continuity planning comes in.
Create a business operations document
List key contacts (accountant, solicitor, bank manager, major clients, suppliers), login credentials for essential systems, and day-to-day processes. Store it securely and tell your attorney where to find it.
Review your business insurance
Key person insurance can provide a financial cushion if you lose capacity. Check whether your existing policies cover incapacity as well as death.
Align your business agreements
Make sure partnership agreements, shareholders’ agreements, and articles of association all work alongside your LPA. Contradictions between these documents can create serious problems.
Brief your attorney
Don’t just name them on the form and forget about it. Walk them through the business, introduce them to key people, and explain your wishes in detail.
LPA vs Court of Protection: The Cost to Your Business
The financial comparison is stark. Here’s what each route looks like for a business owner:
LPA (planned ahead)
£92 registration fee. Your attorney can act immediately once the LPA is registered. Business disruption: minimal. Total typical cost including professional help: £150–£500.
Court of Protection (no LPA)
Application fee £371, plus solicitor costs of £1,000–£3,000+. Processing takes 4–6 months or longer. Ongoing annual supervision fee of £320. Business disruption: potentially catastrophic.
The direct fees are only part of the picture. For a business, the real cost of not having an LPA is the months of paralysis while the Court of Protection processes a deputyship application. Clients leave. Contracts expire. Staff find other jobs. A business that was worth £200,000 could be worth very little by the time a deputy is appointed.
For a full breakdown of the numbers, see our guide on how much an LPA costs.
Key point: You can only create an LPA while you still have mental capacity. Once it’s gone, the option disappears — and the only route is through the courts. For business owners, that delay can mean the difference between a thriving business and a failed one.
Whatever your circumstances, our guided LPA service helps you create the right documents. See pricing for details.
Key Takeaways
- An LPA is essential business continuity planning — without one, staff cannot be paid, contracts lapse, and clients move on during the months it takes to get a Court of Protection order
- Partnership agreements must align with the LPA — the Partnership Act 1890 allows dissolution on grounds of incapacity, so your partnership agreement needs to explicitly allow an attorney to act
- Choose an attorney with commercial awareness — consider appointing a business partner or professional adviser for business matters alongside a family member for personal affairs
- Use the LPA preferences and instructions sections — you can specify whether the business should continue trading, who should be consulted on major decisions, and any conditions on a sale
- Brief your attorney on operations — create a business continuity document with key contacts, login details, and day-to-day processes so your attorney can step in effectively
Common Questions About LPAs for Business Owners
Can my LPA attorney run my business if I lose mental capacity?
If you are a sole trader, yes. A Property and Financial Affairs LPA gives your attorney full authority to manage the business. For limited companies, the attorney cannot act as a director but can exercise your shareholder rights, including appointing new directors.
What happens to a partnership if a partner loses capacity without an LPA?
Under the Partnership Act 1890, a partner’s mental incapacity can trigger involuntary dissolution of the entire partnership. An LPA, combined with appropriate provisions in the partnership agreement, can prevent this.
How much does it cost to get a business LPA vs going through the Court of Protection?
Registering an LPA costs just £92. If you lose capacity without one, someone must apply to the Court of Protection for deputyship, which typically costs £1,000 to £3,000 or more in legal fees, plus ongoing supervision charges. For a business, the indirect costs of delay and disruption can be far higher.
Can I include specific instructions about my business in my LPA?
Yes. The LPA form includes sections for preferences and instructions. You can specify how you want the business managed, whether it should be sold or continued, and any conditions on major decisions. These instructions are legally binding on your attorney.
This guide was last reviewed and updated on . Information is based on current legislation and OPG guidance for England and Wales.
Official Guidance
Further reading from GOV.UK
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