LPA for Business Owners UK (2026): What Happens to Your Business if You Lose Capacity Without One

A Property and Financial Affairs LPA covers all financial and property matters — including business assets, business bank accounts, contracts, and business decisions. It is the correct LPA for protecting a business: (1) THE TWO TYPES OF LPA (MCA 2005 ss.9-14): (a) PROPERTY AND FINANCIAL AFFAIRS LPA: covers money, property, investments, and financial decisions — including business assets. This is the LPA a business owner needs; (b) HEALTH AND WELFARE LPA: covers medical and personal care decisions — it does NOT cover the business at all; (2) WHAT A PROPERTY AND FINANCIAL AFFAIRS LPA ALLOWS THE ATTORNEY TO DO FOR THE BUSINESS: (a) access and operate business bank accounts; (b) sign business contracts, purchase orders, and supplier agreements; (c) pay employees and PAYE/NIC obligations; (d) deal with HMRC on behalf of the business owner — including VAT, corporation tax, and self-assessment; (e) manage business property (renew leases, deal with landlords); (f) manage business investments and assets; (g) close or wind up the business if necessary; (3) WHEN AN LPA CAN BE USED: the property and financial affairs LPA can be used as soon as it is registered with the Office of the Public Guardian (OPG) — it does NOT require the donor to have lost capacity, unless the donor specifies that it should only be used when they lack capacity. Most business owners prefer to give the attorney authority to act at any time (so someone can run the business even while the owner is incapacitated but expected to recover); (4) REGISTRATION: the LPA must be registered with the OPG before it can be used — even in an emergency. Registration takes approximately 20 weeks (as of 2026). Donors should register the LPA well in advance of any anticipated incapacity; the registration fee is £82 per LPA (2026).

For a sole trader, the consequences of losing mental capacity without a registered LPA are severe and potentially business-ending: (1) THE SOLE TRADER'S LEGAL POSITION: a sole trader runs the business in their own name — there is no company or other legal entity to carry the business on. All contracts, bank accounts, HMRC registrations, and licences are personal to the owner; (2) WHAT HAPPENS WITHOUT AN LPA: (a) BUSINESS BANK ACCOUNT FROZEN: the moment a bank is notified that the account holder has lost mental capacity, the account is typically frozen — no one can draw funds or make payments. This means employees cannot be paid, suppliers cannot be paid, and running costs cannot be met; (b) NO AUTHORITY TO SIGN CONTRACTS: no-one has legal authority to commit the sole trader to new contracts or to complete existing ones; (c) EMPLOYEES: wage payments cannot be made; the business risks employment law liability; (d) HMRC: VAT returns may be missed; self-assessment may lapse; penalties accrue; (e) BUSINESS MAY COLLAPSE: in the absence of any authority to keep trading, the business effectively stops — clients may terminate contracts, suppliers may withdraw credit; (3) COURT OF PROTECTION DEPUTY (MCA 2005 s.16): the only way to obtain authority to manage the sole trader's affairs without an LPA is to apply to the Court of Protection for a property and financial affairs deputy. A deputy has broadly the same powers as an LPA attorney but: (a) the application takes 3-9 months; (b) it costs £365 in Court fees plus legal fees; (c) the deputy is supervised by the OPG and must file annual accounts; (d) annual OPG supervision fee: £320 (2026); (e) by the time the deputyship is granted, the business may have already failed; (4) THE SOLUTION: register a Property and Financial Affairs LPA now, while the owner has capacity. Appoint an attorney who understands the business — ideally someone with financial or operational experience.

A company director who registers an LPA cannot simply hand their director's powers to their attorney — the LPA and company law operate in separate spheres: (1) DIRECTOR POWERS ARE PERSONAL: under company law, a director's statutory and fiduciary duties (Companies Act 2006 ss.171-177) attach personally to the director. An LPA attorney can act for the director as a SHAREHOLDER (voting at general meetings, receiving dividends, transferring shares) and as an INDIVIDUAL (accessing the director's personal bank accounts) — but they cannot exercise the director's powers in that capacity if those powers are reserved to the director personally by the articles of association or shareholder agreement; (2) TYPICAL ARTICLES PROVISIONS: most standard articles (e.g. the Model Articles for Private Companies — Companies Act 2006 Sch 1) require that a director must not have a condition making it undesirable for them to act as a director (Article 18(d)) and that the directors may act by majority. If the sole director has lost capacity: (a) there is no-one to sign company documents or resolutions; (b) the attorney may act for the shareholder, but not as a director; (c) if the articles allow shareholder appointment of directors (Model Article 17 — written resolution), a surviving shareholder or the attorney acting for the incapacitated shareholder can pass a written resolution appointing a new director; (3) THE BUSINESS LPA SOLUTION — PREPARE THE COMPANY: before capacity is lost: (a) review the company's articles to ensure they allow director replacement by shareholder resolution; (b) consider adding a co-director or appointing an alternate director now; (c) ensure the LPA explicitly covers the management of all company assets held in the director's name; (d) ensure the attorney is aware of and has access to all company documentation; (4) SOLE DIRECTOR COMPANIES: where the incapacitated person is the only director and the sole shareholder, the LPA attorney acting as shareholder can appoint a new director. They must act carefully under MCA 2005 s.1 — always in the donor's best interests — and should not vote for a director the donor would have opposed; (5) BANKING: company bank mandates often require named signatories. An LPA attorney should promptly notify the company's bank and update the signatory mandate — this requires the company's bank to accept the LPA (many banks have procedures for this).

The standard OPG LP1F Property and Financial Affairs LPA form contains a general powers section but allows additional specific instructions and restrictions. Business owners should tailor the LPA to reflect the business's specific needs: (1) CONTINUATION OF BUSINESS: explicitly state that the attorney is authorised to continue operating the business on the same basis as the donor would have done; (2) EMPLOYING AND DISMISSING STAFF: grant the attorney power to hire, manage, and if necessary dismiss employees during incapacity; (3) BUSINESS BANK ACCOUNTS AND CREDIT: grant the attorney full authority over all business bank accounts, credit lines, and overdraft facilities — name the institutions and account numbers; (4) CONTRACTS: specifically authorise the attorney to enter into and sign contracts in the donor's name on the same terms as the donor would have approved; (5) TAX AND HMRC: authorise the attorney to complete and file all HMRC returns (self-assessment, VAT, PAYE, CIS) and to respond to HMRC enquiries; (6) BUSINESS PROPERTY: authorise the attorney to manage, let, and deal with any business premises or equipment; (7) SALE OR CLOSURE: if circumstances require it, authorise the attorney to sell the business as a going concern or wind it down — preferably with consultation conditions (e.g. 'shall consult the donor's accountant before agreeing any sale'); (8) RESTRICTIONS: specify what the attorney CANNOT do without a second signature or professional advice — e.g. 'shall not sell the business without first obtaining a valuation from a qualified business valuator and consulting [named person]'; (9) SEPARATE LPA FROM PERSONAL AFFAIRS: consider registering a second LPA specifically for the business, with a business-savvy attorney — separate from the personal attorney nominated for family finances. This avoids conflicts of interest; (10) CERTIFICATE PROVIDER: when executing the LPA, the certificate provider must confirm the donor has capacity and is not under undue influence. For a business owner, a professional (solicitor, accountant) as certificate provider is advisable.

Partnerships face different but equally severe consequences when a partner loses capacity without an LPA: (1) PARTNERSHIP LAW (PA 1890): the Partnership Act 1890 governs partnerships unless the partnership agreement provides otherwise. Under s.33 PA 1890, a partnership may be dissolved by the court if a partner becomes permanently incapable of performing their part of the partnership contract. Loss of mental capacity can trigger a right to dissolve — creating severe disruption; (2) WHAT THE PARTNERSHIP AGREEMENT SHOULD CONTAIN: a well-drafted partnership agreement should include: (a) provisions dealing with what happens when a partner loses capacity; (b) whether the incapacitated partner's share can be bought out at a fair valuation; (c) who makes decisions on behalf of the incapacitated partner; (d) whether the partnership continues or dissolves; (3) WITHOUT AN LPA AND WITHOUT A PARTNERSHIP AGREEMENT PROVISION: (a) no-one has authority to make decisions for the incapacitated partner; (b) other partners may be unable to access partnership funds or sign partnership documents; (c) the partnership may need to apply to the Court of Protection for a deputy; (d) the business may be paralysed while waiting for legal authority; (4) WITH AN LPA: the appointed attorney acts for the incapacitated partner in all partnership matters — signing documents, receiving income, voting on partnership decisions, negotiating with the other partners, agreeing a buyout; (5) LLP MEMBERS: a limited liability partnership (LLP) member in the same position as a partner — an LPA is equally essential. The LPA allows the attorney to act as a designated or non-designated member, give or withhold consent to decisions, and manage the member's LLP interest; (6) PRACTICAL STEPS: (a) register a Property and Financial Affairs LPA now; (b) review the partnership agreement to ensure it addresses incapacity; (c) consider keyman insurance to fund a buyout in an incapacity or death scenario; (d) ensure the attorney appointed knows the business, its key clients, and its financial position.