Every business owner (the "principal") should empower someone (an "agent") to act for that owner when that owner cannot because of the owner's incapacity, incompetence or unavailability. Typically the business owner will authorize the agent to buy or sell an ownership interest; initiate, continue or settle litigation; continue or negotiate a contract; change the name or organizational structure of the entity. An agent may be empowered to take other actions specifically related to the owner's business interests. This is especially true of owners of small businesses and professional practices.
If a power of attorney is durable, it survives the incompetence and disability of the principal. This very important attribute allows the agent to take action as directed by the principal even when the principal can no longer act due to incompetence. The owner's competence is essential to the owner's ability to undertake any of the actions listed in the first paragraph. The risk of the owner's incompetence is managed by a duly executed and valid power of attorney. A "valid" power of attorney refers to whether the owner was competent at the time the owner as principal executed the power of attorney. Since the owner must be competent to execute a power of attorney, the best time for the owner to adopt a power of attorney is when the owner is compectent to act. In other words, if there is no power of attorney when one is needed, it is too late.
