Responsibility for the day-to-day management of a Virginia corporation resides with the corporation’s directors and officers. The Virginia Stock Corporation Act offers more flexibility than most people realize, however, to structure the management and governance of a Virginia corporation. In effect, this is an attempt to keep the corporate statute “competitive” with the flexibility afforded to LLCs under the Virginia LLC statute.
Corporate directors and officers must be mindful of the following duties and responsibilities:
1. Paying Employees. Those officers responsible for the payment of salaries must see that those salaries are paid by the company.
2. Payroll Taxes. All payroll taxes must be timely paid. Neglecting this obligation may result in personal, civil or criminal liability to responsible parties. A few minutes of online research will produce a slew of tragic tales of desperate and misguided business owners and executives who tried to solve cash flow problems by not paying the required payroll taxes…PLEASE DO NOT let yourself fall into that trap.
3. Other Taxes. State law imposes personal liability on the persons responsible for reporting and paying any required withholding tax and sales and use taxes.
4. Duty to Inspect. A director has the absolute right to inspect all corporate record books, records, documents, and property at any time. If he or she does not exercise that right, he or she may be held liable for negligence if the corporation suffers loss or its creditors suffer loss by reason of failure to exercise reasonable diligence in such matters.
5. Other Liabilities. The directors of a corporation must be concerned with other sources of liability, which include: failure to act in good faith for the corporation’s best interests; improper payment of dividends; improper distributions; improper purchase or redemption of the corporation’s stock; improper loan to a shareholder, director, or officer of the corporation; fraudulent entries in the corporate books or reports; and failure to properly supervise the operations of the corporation.