In these unsettled times, it's the sign of a smart business
owner to expect the best but prepare for the worst. What
will happen to your business if you are unavailable due to
any circumstance? Perhaps you are a Reservist and get called
into active duty, for example.
By drafting a Power of Attorney, you will be giving someone
the legal right to look after your business affairs if you are
unavailable, away, mentally incapacitated, or otherwise unable
to make business decisions.
Just as many individuals postpone writing a will, many business
owners avoid the step of drafting a Power of Attorney. Both
appear to have a superstitious belief that the act of preparing
for potential problems will attract misfortune.
When we apply the clear light of reason, we all know that
writing a will doesn't imply imminent death and drafting a
Power of Attorney doesn't suggest we'll be unable to operate
our businesses. Both are simply evidence of good planning.
What if an accident or an illness causes you lose the mental
capacity for a period of time? Without a Power of Attorney,
your family, colleagues and the courts will be pitted against
one another trying to straighten things out. Advance planning
will minimize the problems that will arise later.
Alternatively, perhaps you are planning to be away from your
business for an extended period. It's not something
we like to consider, but in the extended absences of an owner,
the potential for employee fraud or theft increases. You want
someone in charge who has your best interests at heart.
Naturally, you will want to consult a lawyer to discuss your
unique situation. However, the following considerations are
likely to be applicable in most cases:
1. When you draft a Power or Attorney, you must be "of sound
mind." Powers of Attorney can be revoked or modified, but again,
you must be deemed to be of sound mind. Documents drafting or
amending Powers of Attorney must be witnessed.
2. By drafting a Power or Attorney, you are giving the "donees"
the legal right to carry out transactions on your behalf. In most areas,
you can stipulate the powers that you are allocating. Typically,
Powers of Attorney include the right to sell or purchase real
estate and other assets, the right to make payments of bills and
debts, and the right to manage investments of various sorts.
3. Typically you can identify two people to have power of
attorney, as well as appointing a substitute in case something happens
to one of the first two. Some advisors recommend appointing three
donees to work jointly in the management of your affairs. Ideally,
one donee should be a family member or friend who has your best
interests at heart. The other should be someone who is connected
to the business and who is familiar with day to day operations.
The third recommended donee is the accountant who handles the
company's books.
4. When drafting the document, be very clear what powers you
are giving the donees. Avoid "gray areas" or areas that could
be open to interpretation.
5. Make sure that at least one of your donees knows where the
Power of Attorney document is kept.
6. In most areas, Powers of Attorney can be Continuing or
Limited. Continuing Powers of Attorney usually take effect
from the date of signing and remain in effect after a person
becomes incapacitated. Limited Powers of Attorney give the
donee authority to act only under certain circumstances. Limited
powers could include real estate transactions, complex investments
like term deposits, RRSP contributions, and so on.
About the Author
June Campbell
How to Write Business Plans, Business Proposals,
JV Contracts,Human Resource Package, More!
No-cost ebook "Beginners Guide to Ecommerce".
Business Writing by Nightcats Multimedia Productions
http://www.nightcats.com