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Business Record Retention Guide

Robert Sattler 08.01.2015 | Berdon Business Advisory Services

Knowing What Stays and What Goes and When.

JUST HOW LONG DO YOU NEED TO KEEP RECORDS?  Do those ledgers and cancelled checks have to pile up forever? What about correspondence? Legal documents? Tax returns? Emails?  Electronic documents?  While there is no quick answer to these questions that’s right for every business, you can develop a practical record retention system that will improve efficiency, produce cost benefits, and meet regulatory and legal requirements.

Once you do, distribute it to all your employees, with clear guidelines on rules and responsibilities for record identification, retention, protection, retrieval, and disposition.  Consistent application is the most important aspect of your record retention policy.

Record retention policies can be inferred from statutes of limitations and laws regarding the availability for certain documents, which vary from state to state. You can eventually destroy most, but not all, documents.  Storing documents electronically may achieve dramatic reductions in retrieval costs and space requirements; however, electronic documents are still subject to record retention policies.  Certain important paper documents such as the agreements noted below, which are permanent in nature, should be preserved physically and can also be stored electronically for easy access and referral.  Your IT department should periodically make backups of all the information on your network – including emails, word processing documents, spreadsheets, and other electronic documents.  IT should also routinely purge electronic documents just as you would purge paper documents.

RETAIN PERMANENTLY

Some documents – especially those that establish your business and record its ongoing progress — should be kept permanently.  Regardless of industry, you should always retain:

  • Articles of incorporation
  • Bylaws
  • Partnership agreements
  • Licenses from government   authorities
  • Capital stock and bond ledger
  • Canceled stock and bond certificates
  • Annual financial statements
  • General ledgers
  • Minutes from partner or stockholder meetings
  • Legal correspondence
  • Firm tax returns and workpapers
  • Copyright agreements
  • Blueprints
  • Bills of sale
  • Deeds to property
  • Title searches
  • Your employee manual
  • Contracts with present employees
  • Payroll records (W-2s, 941s, journals, ledgers)
  • Appraisals
  • Personnel data
 

Here is a guide for when to dispose of other documents. Keep in mind that your business is unique and you may want to adjust these timeframes to your own needs and to federal and state requirements for your industry.  When in doubt, consult your financial advisor or your attorney.

  Type of Record

  Retention Period (years)

  Accident reports and claims

  7 after accident or settlement

  Canceled checks, bank statements, deposit slips

  7

  Invoices  

  7

  Correspondence  

  1 +  current

  Daily cash reports, remittance advices, bank deposit slips

  1

  Disability benefits 

  7 after expiration or settlement

  Discrimination charges by employees

  4 after settlement

  Employee contracts

  7 after termination

  Employee medical history

  7 after termination

  Equipment records

  3 after disposition

  Expense Reports

  7

  HR and related correspondence

  7

  Individual tax returns

  6 plus current year; longer for some supporting documents

  INS 1-9 forms, to comply with Immigration Reform and Control Act

  7 from date of filing or 1 year after termination, whichever is longer

  Insurance documents, including policies, reports, claims and coverage information

  10 after expiration or settlement

  Interim financial statements

  7

  Leases and contracts

  10 after termination

  Other periodic financial reports

  7

  Payroll data and authorization

  7

  Personnel counseling records

  7 after termination

  Personnel data, applications, and contracts – former employees

  7 after termination

  Applications for positions, resumes, or other job advertisements and replies 

  7 after termination for employees; 1 after completion of selection process for   others

  Documents relating to promotion, demotion, layoff, or discharge of an  employee

  7 after change in status

  Salary rates and changes 

  3 after termination

  User manuals for equipment and software

  Until disposition

  Vendors’ invoices and petty cash slips

  7

  Warranties and service agreements

  1 after expiration

 

RECORD DESTRUCTION

Once a financial document has outlived its useful life, see that it is destroyed in a way that would prevent it from being retrieved and used for other purposes.  Look into contracting with a qualified document shredding service.  For electronic documents, not only the network but the backup media need to be purged to be consistent with the record retention policy.

If you have any question about the proper retention and disposition of your personal or business record, contact your Berdon advisor or Robert Sattler at 212.331.7518 or rsattler@berdonllp.com.

 

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