Understanding which categories apply to your company is essential to know which documents to keep. Shredding your documents is the best way to protect your business’s sensitive information and safeguard against identity theft. After the recommended time for retention has passed, you can manually shred your paperwork or find a local document shredding service that will handle the work for you.
How should I store my records?
The liquidator will deal with legal disputes and remaining contracts, as well as interviewing directors to report on the reasons behind the company’s closure. Andjelka is a researcher and writer with 6+ years in digital marketing. Her background in social work and journalism has sharpened her skill in connecting with people from all walks of life.
Businesses should keep operational records – bank statements, credit card statements, cash receipts, and canceled checks for seven years if they have no other tax or business purposes. You should keep business tax returns and all related documents until the IRS can no longer audit your tax return. Therefore, you should store founding legal files as long as your business is active and the reasonable period after if any problems arise. At the same time, using Timeero, businesses can automate their payroll and mileage reimbursement and ensure that their field employees are paid fairly.
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In the U.S., the Equal Employment Opportunity Commission (EEOC) enforces several federal anti-discrimination laws for employers that apply to recordkeeping and hiring. The general rule is to keep employee records for at least seven years after an employee leaves the company, is terminated, or how long to keep business records after closing business retires. However, in the case of a lawsuit or work-related accident, it’s good to keep the records for up to 10 years after resolution. Some organizations need licenses and permits to conduct their business or specific business operations.
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If you are audited by an independent firm, maintain the audit report permanently in your files. In many cases, the more records you maintain the better, as long as the paperwork is filed in an organized fashion. Nonetheless, there’s bound to be a time when your small business starts outgrowing its file cabinets or runs out of space for bankers’ boxes in the records room. Before you begin indiscriminately purging them, know the guidelines for how long you should keep company records. Having a clear, documented record of how the project progressed is vital, especially if employees or other witnesses are unavailable, or have simply forgotten what happened and when. HM Revenue and Customs (HMRC) state that accurate records must be kept for all businesses, regardless of the size of the company.
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These records include sales, purchases, expenses, cash books, mileage records, and bank statements. You need to take special care to store and destroy employee records correctly. These records often include pre-employment background checks, work history and reviews, wage and hourly statements, health and safety inspections, and the reasons for separation from employment. A records retention schedule, backed by legal research, can give you specifics about what is safe to throw out and what you need to keep. Generally, if you are being bought out by another entity, you will want to pass along all these records. Records retention can help if someone tries to come after your company’s assets.
Records must be kept regardless of whether you or your company remain registered for VAT. If you’re concerned that your employees are working another job on company time, you must determine the facts fast and prevent this practice from harming your business. Try searching for a solution to make the entire process of collecting and storing relevant data more reliable, accurate, and efficient.
- In fact, you can be downright inundated with records… from tax returns and expense receipts to invoices, canceled checks, payroll records, bank statements, meeting minutes—the list goes on.
- Keep in mind that other entities (e.g., an insurance company) may vary on recordkeeping length.
- Examples of business records include transportation companies that must maintain records of insurance for drivers and vehicles.
- For personal advice regarding your financial situation, please consult with a financial advisor.
- For a complete list of records and how long to keep them, download our PDF guide here.
- You need to take special care to store and destroy employee records correctly.
Thirdly, carefully kept records could protect you and your business should any problems arise, whether around yourself, your employees, or your clients. This information is helpful but our favorite rule of thumb is to “save everything” and keep anything older than a few years in storage. Unless your business deals with mountains of paperwork, that method will be the easiest way to keep it simple and safe. Use Patriot’s online accounting for stress-free tracking, secure storage, and more. Plus, as your business grows, keeping every important document as a paper file can become cumbersome. Join and enjoy unlimited access to SHRM Executive Network Content.
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- These are the most important that you may need at any time in the future for a variety of reasons.
- Hold bank statements, inventory records, invoices, sales records, cash register tapes, W-2s, 1099s, and other tax filing documents for at least six years.
- The Internal Revenue Service has established some basic record-keeping rules for tax documents.
- When you decide to close your business, it’s essential to know how long you should keep those records.
A small business attorney can advise you on the full list of requirements that are necessary for your business. This includes California, which can investigate 12 years of tax history in businesses suspected of fraud. Large companies that do business in multiple states or internationally may benefit from laws in some states that allow them to shield their records from scrutiny. Many take advantage of this opportunity to “offshore” their headquarters and perhaps use it as a strategic advantage so competitors are unable to examine any available records. When it comes to protections around data, some states have adopted laws covering genetic privacy. You are leaving Discover.com and entering a website operated by a third party.
There are a few different options when it comes to getting rid of old paper records. A paper shredder is one convenient option, but it can take a lot of time and effort to shred old documents. Organizing your physical and cloud-based storage and developing a DRP is the best way to ensure your organization complies with recordkeeping standards. After you’ve reviewed federal rules and your state’s document retention schedules, you may still have records that you’re unsure about. In this case, the Uniform Preservation of Private Business Records Act (UPPBRA) is a good guideline. Some external agencies, such as the Payment Card Industry Security Standards Council (PCI SSC), require businesses to keep documents for PCI compliance.
Unfortunately, no single, steadfast retention rule applies to all kinds of records, meaning you need to categorize your files and create a document retention policy (DRP). Government agencies, such as the Internal Revenue Service and state treasury departments, are the most likely entities that could request various past business documents. Keeping all types of business-related records will be valuable if the need arises to substantiate claims, transactions and information filed on tax returns. You never know when old business records may be useful, so it is advisable to keep all business records as long as it is feasible.
They include records of credit card transactions, checking, savings, and investments. Businesses keep those documents to match them with their accounting records and confirm their expenses and income are correct. They can quickly notice errors if they are incorrect by comparing both record types. When consulting statutory or regulatory information, employers should note that published guidelines outline minimum retention periods. For example, Internal Revenue Service (IRS) record-keeping standards require employers to keep employment tax records for a minimum of four years after the date the tax was due or paid. For more record-keeping information, see IRS Publication 15 and IRS Publication 583.
Businesses organized as corporations should keep some additional documents. These include board and shareholder meeting minutes, annual reports, corporate bylaws and amendments, and a stock ledger permanently. Records of your commercial auto, errors and omissions (E&O), general liability, property coverage, umbrella liability, and medical malpractice (if applicable) insurance should be kept forever. These records can help you defend against claims or suits for compensation that occur long after your business closes. The Library of Congress keeps a wide range of business information and directories.
You can explore their plans with totally transparent pricing by following the link below, and for a limited time, you can try their online bookkeeping service free for one month. These are federal- and state-generated documents that show a business is registered, inspected regularly, and/or principles are compliant with state licensure regulations. Of course, restaurants and facilities that handle food are required to keep business records documenting food sale permits, staff training, pest control, and health department inspections.
How long you need to keep your business records depends on what’s recorded in each document. Because asset values can depreciate over time, your records will help an auditor or tax professional calculate the asset’s depreciation, amortization, or depletion deductions. They can also help them assess the gains or losses realized from the sale or disposal of the property. Other records may be necessary, too, depending on your state, your industry, and other factors.
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