To be a Director or Not to Be ? That is the Question – by Will Hawney – Queensland Administration Services
It was not that long ago that being a Director of a Corporation had many more benefits (not the least being additional tax benefit) than just being in a Partnership or operating as a Sole Trader.
These benefits are becoming dramatically reduced specifically with respect to protection offered to directors.
Impractical though it is, Corporations law dictates that a director must know EVERYTHING that is happening with his or her company in real time despite the qualifications the director may have. An example of this would be: You and a friend or spouse decide to open a mechanical business in an area you deem needs that service.
You however, may and your partner may be qualified mechanics but have no knowledge of the operation of a business. Realising this you employ managers and staff that profess to have the business accumen required, but they are not directors.
Their workmanship is not to the standard they said and the books are a mess and the bills have not been paid.
Next you know, you are receiving summonses in the mail and the Tax man is after you.
The problem is under law, you are fully responsible for the operation of the business even though you did nothing wrong other than you failed to be superman and know everything about everything, you stand to loose all you have worked for.