How a Power of Attorney Can Protect Your Business Interests During Temporary Incapacity 

As a business owner, you are the driving force behind your company's success. But what happens if an unexpected illness or accident leaves you temporarily unable to make decisions? Working with an estate planning attorney to plan for a possible incapacity can protect your business, your employees, and your family from disruption and financial loss. 

At Davidson Estate Law, we have seen firsthand how a sudden incapacity can jeopardize a business you have worked hard to build. For over 25 years, our firm has provided dedicated legal guidance to families and entrepreneurs throughout the Bay Area, including Oakland, Walnut Creek, Berkeley, San Francisco, El Cerrito, and Alameda. We offer a compassionate and straightforward approach to estate planning. 

A Power of Attorney (POA) is a foundational legal document that can provide the protection your business needs during a time of personal crisis. It allows you to appoint a trusted individual, known as an agent, to manage your affairs if you cannot do so yourself. Without one, your business operations could grind to a halt, leaving your family and partners to petition a court for the authority to act on your behalf—a process that is often costly, public, and time-consuming. 

What is a Power of Attorney for Business?

A POA gives a person of your choice the authority to handle financial and legal matters for you. While many people associate POAs with personal finance, a specific type, often called a durable power of attorney for business, is designed to keep your company running smoothly when you are temporarily incapacitated. 

This document allows your chosen agent to perform essential business functions. These tasks can include accessing business bank accounts to pay bills and make payroll, signing contracts, managing inventory, and communicating with employees and clients. By setting up a POA, you maintain control over who manages your business and how it is managed, even when you are not physically or mentally able to do so yourself. 

General vs. Special Power of Attorney

When creating a POA, you can grant broad or limited authority. 

A General Power of Attorney gives your agent extensive power to handle nearly all of your financial affairs, both personal and business-related. This can be useful, but it also carries significant risk if not carefully drafted. 

A Special Power of Attorney, on the other hand, is limited to specific actions or areas. For business owners, a special POA is often the preferred choice. You can create a document that grants authority only for business-related matters. This separation prevents your business agent from accessing your personal accounts and vice versa, creating a clear boundary that protects your assets. 

Why Every Business Owner Needs a Plan for Incapacity

Many business owners have contingency plans for market downturns or operational challenges, but they often overlook planning for personal incapacity. A medical emergency, whether it lasts for weeks or months, can create an immediate leadership vacuum. Without a designated decision-maker, your business could face serious consequences. 

Consider these common scenarios: 

• Payroll stops: If you are the only person authorized to sign checks or approve payroll, your employees might not get paid. 

• Bills go unpaid: Critical vendor payments, rent, and utility bills could be missed, leading to service disruptions and damaged business relationships. 

• Opportunities are lost: A new contract or a chance to secure a valuable client might require your signature. Without an agent to act for you, these opportunities could disappear. 

• Operational chaos: Daily decisions, from managing staff to ordering supplies, may be left undone, causing productivity to decline. 

A durable power of attorney for business prevents this kind of paralysis. The term "durable" means the document remains effective even if you become incapacitated. It activates when needed, giving your agent the authority to step in and manage operations according to your instructions. 

Choosing the Right Agent for Your Business

Selecting an agent is one of the most important decisions you will make. This person must be trustworthy, responsible, and capable of managing your business. Your agent does not need to be a family member. In fact, sometimes a business partner, a key employee, or a professional advisor, like a CPA, might be a more suitable choice. 

When choosing an agent, consider the following qualities: 

• Business acumen: Does this person understand your industry and the specific operations of your company? 

• Integrity: Do you have complete trust in their ability to act honestly and in your best interest? 

• Availability: Is this person willing and able to take on the responsibility, possibly on short notice? 

• Financial responsibility: Has this individual demonstrated good judgment in their own financial and professional life? 

It is a good idea to name a primary agent as well as one or two successor agents. If your first choice is unable or unwilling to serve, a successor can step in without any delay. Talk about your decision with your potential agents to make sure they are comfortable with the role and understand your expectations. 

California's Power of Attorney Laws for Business

In California, the laws governing Powers of Attorney are detailed in the Probate Code. Business owners in the Bay Area should be aware of several key provisions. The state provides a statutory form for a uniform durable power of attorney, which can serve as a starting point. However, for a business, a generic form is rarely sufficient. 

A custom-drafted POA is almost always better because it can be tailored to the specific needs of your company. For instance, you can grant your agent the power to: 

• Buy and sell business assets. 

• Manage business real estate holdings. 

• Access and operate business bank accounts and lines of credit. 

• Hire, manage, and terminate employees. 

• File tax returns on behalf of the business. 

• Deal with stocks, bonds, and other securities owned by the business. 

California law requires that the person granting the power (the principal) has the mental capacity to understand the document they are signing. The POA must be signed by the principal and notarized or signed by two qualified witnesses. For a POA to be durable, it must contain specific language stating that it will remain in effect or become effective upon the principal's incapacity. Without this language, the agent's authority would automatically terminate if you become incapacitated, defeating its primary purpose. 

It is also important for your agent to understand their legal obligations. Under California law, an agent is a fiduciary, which means they must act loyally and in your best interest, avoid conflicts of interest, and keep meticulous records of all transactions they make on your behalf. 

Estate Planning Attorney in Oakland, California

One of the most valuable things you can do is to set up a plan for the care and financial future of your loved ones. For more than 25 years, Davidson Estate Law has been a trusted source of legal assistance and compassionate counsel for Bay Area families.  

We know how challenging estate planning issues can be, so we are ready to help. Call us if you need to draft a will, a revocable living trust, administer the assets of a loved one, establish a power of attorney, or handle probate court. Serving Bay Area individuals and businesses in Oakland, Walnut Creek, Berkeley, San Francisco, El Cerrito, and Alameda.