I know, I know… you have read it over and over again here on Epilawg that it is important to have documents in place for times of incapacity. Yet, as Jayne Sykora and I just attended a conference together, I was reminded of the importance to do so particularly if you own a business. As business partners, Jayne and I are able to backup one another. If something happens to one of us, the other is able to step in and tend to necessary tasks. However, if something happened to both of us, we do have a plan in place to ensure someone else can make various decisions on our behalf, complete certain transactions and do whatever is needed to either keep our business going or wind things up to shut it down.
If there are multiple owners of your business, you should ensure the appropriate people are designated to act on various accounts and proceed with different transactions. Some companies may limit who has the authority to withdraw funds or enter into agreements on behalf of the company, but it is important to have a line of succession in case the primary person is unable to act.
You can designate the line of succession in the company’s governing documents or even through a power of attorney. Under the Minnesota Statutory Short Form Power of Attorney, a principal can authorize the attorney-in-fact to handle a wide range of tasks on behalf of the principal and/or business. Minn. Stat. §523.24 Subd. 5.If the principal would like to limit the authority they can do so by drafting a common law power of attorney.
It is also important to recognize any limitations on who can be named as an authorized party or attorney-in-fact on behalf of the business based on the type of business or services provided. For example, a business that is designated as a “professional firm,” meaning a company that furnishes professional services such as medical, legal or tax services, might be required to only name someone else who is licensed to perform such services to carry on those business operations.
If you have more questions about establishing a business succession plan, be sure to contact an attorney to explore the different options best suited for you and your company.
