Whether you are a seasoned or a new business owner, you have certainly learned one certainty: There is a lot of paperwork. Since running a successful business is a monumental accomplishment, the paperwork seems like a necessary evil. It is very tempting to throw away many of those papers and files that have taken up so much room for so long. On the other hand, it’s tempting to place every last piece of paper and every receipt into a box and save it for eternity. However tempting that may be, there are some papers you do need to keep, and some you need to destroy, and for varying amounts of time. In other words; it’s complicated.
This can be a very confusing task to go through, and you, like many other businesses, are probably thinking you should keep everything just in case. That can create overcrowding in your file cabinets of unnecessary and possibly sensitive information that can get misplaced, lost, or in the wrong hands.
Fortunately, in the modern era, there are companies that can help you store this information digitally. Many legal entities will accept digital copies as originals, although you should check with your attorney and insurance agent to ensure which can be kept digitally and which must remain in paper form.
In addition to giving you your office space back, the benefit of having your paperwork stored digitally is by a company is that it is backed up, secure, and systematically filed in one place so it is fast and easy to pull up the information. That means you get it when you need it.
The goal of this blog is to give you the information you need for retaining business records. There is a table below that gives general guidelines on how long to keep certain types of documents, but, before you skip down there, please take the following into consideration:
- Please check with your lawyer, accountant, and insurance agent annually to see what they recommend.
- It’s always good practice to keep your records for one and only one year longer than recommended.
- Remember to destroy old records – shred paper; delete digital.
- Make sure your records are filed and retrievable. According to an article in RecordsNation.com, Morgan Stanley was fined $13 million in 2017 for inadequate record-keeping, among other things. (https://www.recordnations.com/2017/05/managing-record-retention-guidelines/) Whether digital or paper, have a good filing system.
Now that you have the basics down about what to keep and what to destroy – not throw away – destroy – in terms of records, here is a hand chart, put together by Grossman St. Amour, CPAs, PLLC.
BUSINESS ACCOUNTING RECORDS
| Accounts payable | 7 years |
| Accounts receivable | 7 years |
| Audit reports | Permanent |
| Chart of accounts | Permanent |
| Depreciation schedules | Permanent |
| Expense records | 7 years |
| Financial statements (annual | Permanent |
| Fixed asset purchases | Permanent |
| General ledger | Permanent |
| Inventory records | 7 years (permanent for LIFO system) |
| Loan payment schedules | 7 years |
| Purchase orders | 7 years |
| Sales records | 7 years |
| Tax returns | Permanent |
BUSINESS BANK RECORDS
| Bank reconciliations | 2 years |
| Bank statements | 2 years |
| Cancelled checks | 7 years (permanent for real estate) |
| Electronic payment records | 7 years |
BUSINESS CORPORATE RECORDS
| Board minutes | Permanent |
| Bank statements | Permanent |
| Business licenses | Permanent |
| Bylaws | Permanent |
| Contracts – major | Permanent |
| Contracts – minor | Life + 4 years |
| Insurance policies | Life + 3 years (verify with agent) |
| Leases | Permanent |
| Mortgages | Permanent |
| Patents | Permanent |
| Shareholder records | Permanent |
| Stock registers | Permanent |
| Stock transactions | Permanent |
| Trademarks | Permanent |
BUSINESS EMPLOYEE RECORDS
| Benefit plans | Permanent |
| Employee files (former employees) | 7 years or state statute for lawsuit |
| Employment applications | 3 years |
| Employment taxes | 7 years |
| Payroll records | 7 years |
BUSINESS REAL PROPERTY RECORDS
| Construction records | Permanent |
| Lease payment records | Life + 4 years |
| Leasehold improvements | Permanent |
| Real estate purchases | Permanent |
INDIVIDUAL RECORDS
| Divorce documents | Permanent |
| Estate planning documents | Permanent |
| Home improvement receipts | Ownership period + 7 years |
| Home purchase documents | Ownership period + 7 years |
| Income tax returns and all supporting documents | 7 years |
| Insurance policies | Life of policy + 3 years |
| Loan documents | Term of loan + 7 years |
| Retirement plan annual reports | Permanent |
Record Retention Times
To get you started, here are some basic guidelines for the length to maintain your records. Laws vary by state so you should have your attorney review your program once it is completed. (Table from Records Nation https://www.recordnations.com/articles/business-records-retention/).
| Business Records Retention Times | |
| Type of Record | Retention Period (Years) |
| Articles of incorporation | Permanent |
| Bylaws | Permanent |
| Capital stock and bond records | Permanent |
| Contracts & agreements (government construction, partnership, employment, labor) | Permanent |
| Legal correspondence | Permanent |
| Minutes | Permanent |
| Financial Records Retention Times | |
| Type of Record | Retention Period (Years) |
| Auditors’ reports | Permanent |
| Bank debt deduction | 7 |
| Bank deposit slips, reconciliations, statements | 4 |
| Bills of lading | 4 |
| Budgets | 2 |
| Checks – cancelled | 4 |
| Contracts – purchase and sales | 4* |
| Credit memos | 4 |
| Depreciation records | 4* |
| Employee expense reports | 4 |
| Employee payroll records (W-2, W-4, annual earnings records, etc.) | 6* |
| Financial statements — annual | Permanent |
| Financial statements — interim | 4 |
| Freight bills | 4 |
| Internal reports (Work orders, sales reports, production reports) | 4 |
| Inventory lists | 4 |
| Invoices – Sales and cash register receipts, merchandise purchases | 4 |
| Invoices — purchases (permanent assets) | 4* |
| General ledger | Permanent |
| General, cash receipts, cash disbursement, and purchase journals. | Permanent |
| Payroll journal | 4 |
| Petty cash vouchers | 4 |
| Subsidiary ledgers (accounts receivable, accounts payable, etc.) | 6 |
| Time cards and daily time reports | 4 |
| Worthless securities | 7 |
| Personnel Records Retention Times | |
| Type of Record | Retention Period (Years) |
| Personnel Accident Report/Injury Claim | 11 |
| Attendance Records | 4 |
| COBRA Records | 3 |
| Employee Benefit Plans | 2* |
| I-9 Forms | 1* |
| Medical and Exposure Records – related to toxic substances | 40 |
| OSHA Training Documentation | 3 |
| OSHA Logs | 6 |
| Patents | Permanent |
| Personnel files | 6* |
| * Retention periods begin after termination, | |
| Inventions and Copyrights Retention Times | |
| Type of Record | Retention Period (Years) |
| Patents | Permanent |
| Copyrights | Permanent |
| Trademarks | Permanent |
| Servicemarks | Permanent |
| Insurance Records Retention Times | |
| Type of Record | Retention Period (Years) |
| Accident reports | 6 |
| Fire inspection reports | 6 |
| Group disability records | 6 |
| Insurance policies | 6 * |
| Safety records | 6 |
| Settled insurance claims | 4 * |
| * Retention periods begin after termination, expiration, disposal, etc. of item. | |
| Real Estate Records Retention Times | |
| Type of Record | Retention Period (Years) |
| Mortgages | 6 years |
| Contracts | 6 years |
| Deeds | Permanent |
| Pension/Profit Sharing Records Retention Times | |
| Type of Record | Retention Period (Years) |
| Actuarial reports | Permanent |
| Associated ledgers and journals | Permanent |
| Financial statements | Permanent |
| IRS approval letter | Permanent |
| Plan and trust agreement | Permanent |
3SG Plus is a leader in the digital transformation industry. The experts at 3SG Plus provide transformative business solutions that streamline operations, reduce cost, and help organizations of all sizes across many verticals meet their strategic goals and revenue objectives. 3SG Plus innovative solutions enable businesses to create opportunities for growth, enhance security, reduce liability, and improve overall outcomes for employees and customers alike.
