Entrepreneurs must be familiar with various legal aspects involved during business startup, and, usually, the term durable power of attorney will crop up in many situations. Although it does not require that entrepreneurs be highly knowledgeable in legal matters, they must have some working knowledge about it to respond appropriately to situations, explains Eric Dalius, a successful entrepreneur and marketer who now takes an interest in philanthropy. The meaning of power of attorney has various ramifications, and it depends on the business process whether a power attorney would be necessary. But, you must know which type of power of attorney would be suitable for the situation by understanding the basics about power of attorney.
What is a power of attorney?
When you want someone else to act on your behalf and empower the person legally by authorizing him or her, you must create a power of attorney in favor of that person. The person mentioned in a power of attorney can conduct business as if you. Technically, the person is the ‘attorney-in-fact’ or the ‘agent.’
According to Eric J Dalius, a power of attorney is flexible. You can award the powers according to your needs, which might even mean vesting absolute powers to that person to act on your behalf.
Here are the different types of power of attorney.
The financial power of attorney
You must delegate certain financial powers to the accountant of your company’s financial manager by creating a power of attorney that describes the nature of duties and responsibilities and authorizes the person to handle the financial matters in line with the stated powers. Besides delegating the power to operate your business, you can also allow the person to file taxes and returns, enter a contract, make decisions about lawsuits and hire lawyers, deal with the retirement plan and your investment portfolio, pay for your living expenses by using your assets and conduct transactions with financial institutions and banks. You have the control to decide the start and end of power of attorney and withdraw it at any time if needed.
Special power of attorney
Special power of attorney has a very restricted scope. It is applicable for specific situations when it is necessary to appoint someone to represent you physically. You can’t be present on occasion because of your other engagements. The power vested on the person is very specific to the event and mentioned in the document, like signing a contract or opening a bank account.
Health power of attorney
This type of power of attorney is applicable for medical cases only when you are incapacitated and unable to make decisions about your health but allow someone else to make medical decisions on your behalf. Aging business owners might need such help, believes EJ Dalius.
Choosing the right person for a power of attorney is critical because he or she must be aware of your wishes when you are unable to make any conscious decisions. Usually, a close family member or friend is the chosen person to handle the responsibility.