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If you own a business in Texas, there may be situations where you need someone else to handle essential transactions on your behalf. This is where a power of attorney (POA) comes in. A power of attorney allows you to designate an agent to act in your place for specific business matters. This article will dive into how to use a power of attorney for business transactions in Texas.
What Business Transactions Can Be Handled with a Power of Attorney in Texas?
A power of attorney can cover a wide range of business transactions in Texas, depending on how it is written. Some common examples include:
- Signing contracts and agreements
- Managing bank accounts and financial transactions
- Filing tax returns and handling tax matters
- Buying, selling, or leasing real estate and other business assets
- Managing employees, including hiring and firing
- Dealing with government agencies on licenses, permits, and compliance issues
- Representing the business in legal matters
The specific powers granted to the agent can be customized based on the business’s needs and the level of authority the principal wants to delegate.
Executing Contracts and Agreements
One of the most important uses of a POA for businesses is allowing the agent to enter into and sign contracts on behalf of the company. This could include anything from supplier purchase orders to client service agreements to office or retail space leases.
The agent can negotiate terms, review documents, and legally bind the business to the contract. The principal must trust the agent to make decisions in the company’s best interests.
Types of Contracts an Agent Can Execute
With a properly drafted power of attorney, an agent can sign a wide variety of contracts for the business, such as:
- Vendor and supplier agreements
- Client service contracts
- Employment contracts
- Independent contractor agreements
- Non-disclosure and non-compete agreements
- Commercial leases
- Equipment rental or purchase agreements
- Loan and financing documents
However, if desired, the principal can limit the agent’s authority to only certain types of contracts. It’s important to specify any limitations in the POA document clearly.
Banking and Financial Matters
A power of attorney can enable the agent to handle a variety of financial transactions for the business, such as:
- Opening and closing bank accounts
- Depositing and withdrawing funds
- Writing and signing checks
- Applying for loans and lines of credit
- Managing investments and securities
- Accessing safety deposit boxes
Granting this type of financial authority requires high trust in the agent. The POA document should specify any desired limitations on the agent’s power over business finances.
Online Banking and Financial Transactions
These days, many banking and financial activities are conducted online. A power of attorney can authorize the agent to access and manage the business’s online accounts, including:
- Viewing account balances and transaction histories
- Transferring funds between accounts
- Paying bills electronically
- Enrolling in automatic payments
- Updating account information
- Communicating with financial institutions via secure messaging
The principal must check with each financial institution on their specific requirements for granting online access to an agent under a POA.
Tax Filings and Issues
Dealing with taxes is a necessary part of running a business. A power of attorney can appoint the agent to handle tax matters with the IRS and the Texas Comptroller of Public Accounts on behalf of the company. This may involve:
- Preparing, signing, and filing tax returns
- Making tax payments or arranging payment plans
- Representing the business in tax audits or appeals
- Claiming refunds or credits owed to the business
- Receiving confidential tax information
Designating a tax professional, such as a CPA or enrolled agent, as the POA can ensure that these complex matters are properly handled.
Tax Implications of Using a Power of Attorney
Understanding the potential tax consequences of granting a power of attorney is important. Some key considerations include:
- The agent has a fiduciary duty to act in the business’s best interests and could be held liable for any fraudulent or negligent actions that result in tax penalties.
- Having a POA does not relieve the principal of their ultimate responsibility for the accuracy and timely filing of tax returns. The principal should review all returns before they are filed.
- In some cases, the agent may need to obtain their own Preparer Tax Identification Number (PTIN) from the IRS to sign tax returns on behalf of the business.
- If the agent is compensated for their services, this income may be taxable to them and deductible by the business.
Consult with a tax advisor to understand all the implications of using a POA for tax matters.
Real Estate and Business Asset Transactions
For businesses that own property or valuable equipment, a power of attorney allows the agent to deal with buying, selling, or leasing these assets. The POA could grant the power to:
- List properties or assets for sale
- Negotiate terms of sale or lease
- Sign purchase agreements, mortgage documents, or lease contracts
- Attend closings and transfer titles
- Manage rental properties, including collecting rent and handling repairs
A limited power of attorney can be used if the principal only wants to give authority for a specific transaction, such as selling a particular piece of real estate.
Due Diligence for Real Estate Transactions
When an agent is representing the business in a real estate deal under a power of attorney, they have a duty to review all aspects of the transaction thoroughly. This includes:
- Ensuring the property has a clear and marketable title
- Investigating any liens, easements, or restrictions on the property
- Reviewing zoning and land use regulations
- Obtaining necessary inspections and appraisals
- Confirming that financing is secure and on favorable terms
- Verifying that the transaction complies with all relevant laws
The agent should keep detailed records of their due diligence efforts and communications in case any issues arise later.
Who Can Serve as an Agent for a Business Power of Attorney in Texas?
The principal can name any competent adult as the agent for a business power of attorney in Texas. This can be a business partner, employee, family member, friend, or professional advisor. Some factors to consider when choosing an agent include:
- Trustworthiness and loyalty to act in the best interests of the business
- Familiarity with the company’s operations and goals
- Business acumen and decision-making skills
- Availability and willingness to serve
Many businesses select a partner or executive as the agent, as they are closely involved with the company. Professionals like attorneys or accountants may also be good options for handling more technical matters.
Can You Have Multiple Agents?
Texas law allows a principal to name multiple agents under a power of attorney. This can provide flexibility and backup options. The POA document should specify whether co-agents can act independently or must make decisions jointly. It’s also wise to name one or more successor agents who can step in if the primary agent is unable or unwilling to serve.
Fiduciary Duties of an Agent
An agent under a power of attorney has a legal fiduciary duty to act loyally in the principal’s best interests. This means the agent must:
- Follow the principal’s reasonable instructions
- Act with care and diligence
- Keep the principal’s property and funds separate from their own
- Avoid conflicts of interest
- Keep detailed records of all actions taken and transactions made
- Provide an accounting to the principal upon request
An agent that breaches their fiduciary duty could face legal liability. Principals must choose agents they trust implicitly to fulfill these essential duties.
Why a Power of Attorney Matters for Texas Businesses
Having a power of attorney in place provides several significant benefits for Texas businesses:
Continued Business Operations
If the principal is unavailable due to travel, illness, or other circumstances, having an appointed agent ensures that essential business transactions can still be handled. This continuity is crucial for maintaining relationships with customers, suppliers, and other stakeholders.
Time and Efficiency
Delegating specific tasks and decisions to a trusted agent can allow the principal to focus on big-picture strategy and growth. The agent can attend to routine matters or areas where they have specific expertise.
Contingency Planning
A durable power of attorney remains in effect even if the principal becomes incapacitated. This can avoid court intervention to appoint a guardian to manage business affairs.
Flexibility and Customization
A power of attorney can be tailored to fit the unique needs of each business. The principal has full control over what specific powers to grant the agent and can put limitations in place as needed. Different agents can be appointed for various functions, such as financial matters vs. legal issues. The POA can also be revoked or changed at any time as long as the principal is competent.
Who Needs a Power of Attorney for Their Texas Business?
While not legally required, a power of attorney is a wise planning tool for most Texas business owners and key executives. It’s especially important to consider for:
- Sole proprietors or single-owner LLCs
- Business owners nearing retirement age
- Companies doing business in multiple locations
- Anyone with significant business assets or complex transactions
- Businesses with out-of-state or international activities
Work with an experienced business attorney to determine the right type of power of attorney for the company’s needs and to properly document the agent’s authority.
Other Estate Planning Considerations for Business Owners
A power of attorney is just one component of a comprehensive estate plan for business owners. Other important tools to consider include:
- Buy-sell agreements that provide for the disposition of an owner’s interest in the event of death, disability, or termination
- Succession plans that outline how the business will be managed and transitioned to new leadership when the owner retires or dies
- Life insurance to provide liquidity for the owner’s family and fund any buy-sell obligations
- Trusts to manage and protect business assets and provide for the owner’s beneficiaries
An experienced estate planning attorney can help create an integrated plan that addresses all aspects of the business owner’s needs.
Conclusion
A power of attorney can be a valuable tool for Texas businesses to ensure seamless operations and decision-making. By carefully selecting a trusted agent and granting the appropriate scope of authority, business owners can confidently delegate important transactions. A well-drafted power of attorney provides flexibility and protection to keep the business running smoothly.
Other Related Articles:
- Power of Attorney for Elderly Parents in Texas: What You Should Know
- Power of Attorney for Real Estate Transactions in Texas: Key Considerations
- What Happens When a Power of Attorney Expires in Texas?
- Emergency Power of Attorney in Texas: When and How to Use It
- Using a Power of Attorney for Vehicle Transactions in Texas
- Texas Medical Power of Attorney for College Students: Why It Matters
- Medical Power of Attorney and HIPAA in Texas: What You Should Know
- How to Choose the Right Agent for Your Medical Power of Attorney in Texas
- Living Will vs. Medical Power of Attorney in Texas: Which Is Right for You?
- Steps to Create a Medical Power of Attorney for a Minor in Texas
FAQs
Unless the POA includes a specific termination date, it remains valid until revoked by the principal or the principal dies or becomes incapacitated (unless it is a durable POA). The POA can also specify when the agent’s authority begins.
Yes, it is possible to name co-agents who can act independently or require them to make decisions jointly. Successor agents can also be designated in case the primary agent is unavailable.
Yes, Texas law requires powers of attorney to be signed by the principal in front of a notary public. Some institutions may also require additional witnesses for certain high-stakes transactions.
The cost will depend on the complexity of the POA and the attorney fees in your area. Expect to pay anywhere from a few hundred dollars to a couple thousand for a comprehensive, customized power of attorney drafted by an experienced business lawyer.
In general, a POA properly executed under Texas law should be recognized in other states under the Full Faith and Credit Clause of the U.S. Constitution. However, for transactions involving real estate, it’s best to have a POA that complies with the laws of the state where the property is located.
