Protecting Your Business When You’re Incapacitated

Planning for what will happen to your small business after you die is important. Just as important is planning for what will happen to it if you become incapacitated. Whether you become seriously ill or are involved in an accident, you need to have a plan in place to guarantee your business can continue until you recover.

One strategy to achieve this is using a durable power of attorney. Normally, when you appoint an agent to act on your behalf, your agent’s authority terminates if you become incapacitated. Not so with a durable power of attorney, and that’s what makes this document so powerful.

By appointing someone to act as your agent in a durable power of attorney, you authorize them to carry out the powers you grant them even if you become incapacitated. In fact, you can specify that the power of attorney only becomes effective if you become incapacitated.

What kinds of power can you grant under a durable power of attorney? The answer is lots. Just look at the statutory durable power of attorney, a form suggested by the California Legislature. It starts out with a warning in all-capital letters:


Later, it describes the kinds of powers you can grant your agent, including “business operating transactions.” Elsewhere in the Probate Code, the law explains what that power includes, like operating, selling, or terminating your business. Basically, a durable power of attorney gives your agent the same power over your business as you have!

Choosing the Right Person

Because your agent’s authority under a durable power of attorney are so extensive, and because you won’t be able to oversee their conduct when that authority exists, choosing the right person to act on your behalf is critical. Appointing the wrong person could cause you serious financial harm. Here are some guidelines for selecting the right person:

Choose someone you trust

You shouldn’t appoint anyone unless you are sure that he or she will only act in your best interests.

Choose someone who knows what he or she is doing

Just because someone is trustworthy and acts with the best of intentions doesn’t mean that he or she can properly run your business. You want someone who is financially literate and familiar with your business operations.

Choose a person who will agree to serve

This one sounds obvious, but it’s important. If you name someone who isn’t interested in acting as your agent, then the appointment will be for naught. So, you should discuss your plan with whomever you will name as your agent.

If you’re concerned about what will happen to your business if you become unable to run it, it’s never too early to start planning. Contact an experienced estate-planning attorney today to discuss durable powers of attorney and other strategies for protecting your business.