Tax tip: If your spouse or common-law partner and/or other family members are directors of your corporation, consider paying them a director’s fee for services performed. Such services usually include attending directors’ meetings, directing the management and affairs of the business, approving financial statements, declaring dividends, etc.
On the downside, as a director of a corporation, you should be aware of your responsibility should the corporation fail to deduct and remit income taxes on payments to employees or on certain payments to non-residents. Directors can also be held liable for the corporation’s failure to collect and remit GST/HST.
Should the corporation fail to deduct and remit, as director, you can be held liable along with the corporation for paying the required amounts, including interest and penalties. However, you won’t be held liable if you can demonstrate that you exercised a reasonable degree of care to prevent the failure of withholding and remitting.
Tax tip: Do not take your responsibility as a director lightly. If the corporation is in financial difficulty, you should take additional precautions to ensure that withholding taxes are remitted on a timely basis. Consider resigning as a director of a corporation that is having serious difficulties. Ensure that this resignation is in writing and is recorded in the minute book.