Legal Question in Business Law in California

Re: Board of Director's tax liability

Need much more information to assist. Call if you would like to discuss. Don Holben 800-685-6950

Re: Board of Director's tax liability

Generally, it is the person who signs the return who could become liable. If you are not a major share holder, you probably would not have any personal liability.

You and the corporation should seek the advice of a tax attorney, allowing them to review all of your documents.

Re: Board of Director's tax liability

The IRS can assess a so-called "100% penalty" against an individual for the failure of a corporation to deposit taxes that have been withheld by the corporation from employee earnings. The penalty can be assessed against any individual who is personally responsible to any significant degree for the failure to make the deposits.

The 100% penalty is 100% of so-called "trust fund" taxes, i.e. money held by the corporation on behalf of the IRS such as withholding taxes.

If you are an outside director and not involved in the corporation's day-to-day management, and did not participate in a policy decision to pay other creditors while leaving the IRS unpaid, you are probably immune from attempts to assess the penalty against you.

The more likely targets of the 100% penalty are the folks in corporate management who prioritized use of funds, managed cash, etc. The IRS will sample corporate checks to see who signed them as a way of pinning blame on someone. They have other ways to determine who was in charge of allocating cash as well.

It is not a good idea to serve on corporate boards unless you have directors' insurance and the bylaws provide for indemnification. You might want to obtain a copy of the American Bar Association's paperback book on corporate director responsibilities. It's available to non-members and well worth reading if you serve on boards. One thing it advises is to keep well informed on corporate affairs.

Re: Board of Director's tax liability

It is possible they could look to you for responsibilty. Your involvment or knowledge of tax and other day to day matters would determine the outcome. Resigning now would not assist for past liability.

Joel Selik

Masters of Law-Taxation

www.seliklaw.com

Re: Board of Director's tax liability

First off reassigning as either an officer or director of the Corporation never clears you of any potential liability that you may have incurred during the period of time that you held such a position. It just clears you for any future activity. Secondly, and most importantly, you must understand what your responsibilities, duties and job description he is in terms of the position you hold in a Corporation, or any other entity for that matter. There is insurance which insures under certain circumstances the acts of the individuals in the air position in the Corporation. This is not unlimited as to amount or as to conduct. You cannot rely on the insurance factor. You must rely on your own non-culpabule, reasonable behavior. If you don't understand what your responsibilities are and what reasonable is under the circumstances, get hold of the corporate attorney and asking questions. Get the answers in writing understand the better what you are supposed to do. There are numbers of written by its witch you can find that may help you. Most of all please understand that you must be responsible in the position. Lax acts lead to major problems. Now dealing with unpaid taxes, position alone is not the test in the corporate entity. It is responsibility in whether or not you participated in the nonpayment, the decision not to make the payment, the overseeing of the people responsible without holding them responsible or requiring the payment when you discovered it had not been made. If you didn't discover it you may possibly be as equally responsible. Personal liability in corporate entities generally are not a bar to responsibility or payment of taxes when due in a timely manner. But that means that you have some responsibility in dealing with those payments under most circumstances. This is a very technical area can you must get proper legal advice as to what he should do to protect your self in any situation when you hold the position in a business entity. I have lectured about this substantially over the years and until somebody gets into trouble they don't really realize the personal facts on their acts or inactions.I have practiced law in the San Francisco Bay Area for over 30 years in this specialty if you wish to contact me please feel free to call me at 925 -- 945 -- 6000.