New Power of Attorney Form: What it Means for Your Small Business
By Kevin P. McKernan Esq., The Law Firm of Kevin P. McKernan
The Power of Attorney document is a powerful instrument that allows an agent (or agents) to act on behalf of a principle and is a crucial estate planning document. The potential exists for a principal to assign significant power to an agent, which can be a family member, friend or financial institution. As you may know, if you have ever executed one before, New York seeks to simplify the complicated world of Powers of Attorney documents by using a standard form. A New Power of Attorney form went into effect June 13, 2021 and makes some significant changes to the old form. So long as it was validly executed, a Power of Attorney form executed prior to June 13, 2021 will be grandfathered in and will still be enforceable, however it is advisable to review your estate planning documents every few years and update as needed.
Although the Power of Attorney is generally thought to apply to individuals in personal situations, this is a misnomer. A properly drafted and executed Power of Attorney can be used in many situations, for business entities of all size, including solo, small and mid-sized entities.
The Power of Attorney can be quite general, granting your Agent(s) broad power to stand in your shoes with respect to any business transaction, or can be narrowly tailored to allow your Agent to stand in your shoes for limited actions, or even one specific action. The Power of Attorney may grant the Agent(s) a multitude of powers, including but not limited to, the ability manage your property(ies) and conduct other real estate transactions, banking transactions, enter into contracts, make legal claims, defend legal actions, speak with government agencies regarding licensure and business matters, and manage tax matters (file, pay and communicate with tax agencies). For business entities it can be executed by any principal who is competent to enter into a contract on behalf of the entity. It is obviously important to choose a knowledgeable and trusted agent.
In addition to delegating power, the single most important reason to have a properly executed Power of Attorney document as a small business owner is to ensure that your business operations can carry on in the event of your unavailability or incapacitation. If an individual cannot perform duties for a variety of reasons (i.e. travel or illness, etc.) the business can continue operations. This is of the utmost importance if you have ongoing relationships with clients who are expecting goods or services and employees who must be paid. Even if your business can not go on without you individually, someone will need to wind down your affairs.
The Power of Attorney is one tool for businesses to use to conduct their affairs. It should also be noted that an Agent(s)’ power ceases when you die. For this reason, business owners should also have a detailed succession plan in place as part of their comprehensive estate plan, even if the business is sole or family owned. It is important to leave detailed directions to hand off to your successor(s) or executor(s) so that they have a roadmap as to how they would continue (or wind down) your business after you’re gone. You must not assume that your loved ones and associates know how to step into your shoes and run your business and you also must not assume that they will be able to figure it out without causing more harm than good.
McKernan Law can assist you with your comprehensive estate plan, including the drafting and execution of a Power of Attorney, a business succession plan, as well as the more traditionally known estate planning documents, such as a Last Will and Testament, Health Care Proxy/Living Will, trusts, and asset protection from future creditors and Medicaid.