Knowing which records to retain and how long to store them is crucial to operating a successful business. They’re a documented history of your company’s activities including financial statements, legal contracts, customer data, inventory logs, and human resources files. Using cloud-based storage not only saves on space, but also can be great for organizing and keeping your documents secure, since most services guarantee protection through encrypted networks.

Some records, including retirement pension financial records, certified public audit reports, and trust documents, have a much longer holding period than other documents like tax records. The good news is that you can get rid of many documents to help you cut down on storage space. 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. The IRS and Small Business Administration (SBA) recommend you keep key business documents on file long after your business closes. The SBA and many state agencies recommend that you keep most of your business records for at least seven years after closing.

• In the US, the IRS requires companies to keep their business tax returns for at least 3 years from the time of tax filing.
• They specialize in tax prep, accounting and bookkeeping needs, and payroll services.
• Digital files offer the advantage of real-time access to information from anywhere.
• Other employee records, including pay rate, hours worked, time cards, bonuses, withheld taxes, etc., should be kept for at least two years.
• If you’re a corporation, you’ll also need to keep any director or shareholder meeting minutes and a stock ledger.
• Provided the retention periods are in conformity with applicable guidelines, it is prudent to set retention periods to the minimum required, to minimize the risk of unauthorized access to data.

Ownership Records and Other Key Business Documents

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. Business records can be valuable, such as customer orders, customer lists, and revenue projections. Other documents are required to be retained for tax and compliance reasons.

To ensure compliance, you should also consider the state’s requirements. For example, employee records must be kept in California for at least four years, according to California’s Government Code section 12946. However, if the IRS suspects a major tax violation, it can investigate as far back as six years. Therefore, you may want to play it safe to protect your business and keep all tax records and related documents for at least six years. Unfortunately, there isn’t a hard-and-fast retention rule that would apply to all kinds of records. It would be best to determine what types of documents you have stored, categorize them, and make a retention policy.

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• Records supporting the cost basis in assets owned, such as buildings and long-lived equipment, should be retained until at least three years after the asset is disposed of.
• Log into your owner’s portal for more free articles and advice that can help you with every step of the business closure process.
• As an alternative to paper records, you can store your records digitally.
• Some organizations need licenses and permits to conduct their business or specific business operations.
• If keeping other documents around longer term makes you anxious, you can opt to scan them to create electronic copies and then dispose of the original paper documents.

The IRS has a time frame for some records while the Department of Labor (DOL) sets the duration for others. Keep in mind that other entities (e.g., an insurance company) may vary on recordkeeping length. Therefore, we recommend that you scan all paper records to store them as digital records.

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Keep in mind that what follows is just general guidance and not necessarily the final word. Try searching for a solution to make the entire process of collecting and storing relevant data more reliable, accurate, and efficient. IRCH is the ONLY company in the U.S. dedicated to data retention scheduling. SHRM Members enjoy unlimited access to articles and exclusive member resources.

What are document retention best practices?

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Inactive records do not have to be readily available, as they are not accessed on a regular basis. For example, historical financial or legal records are considered to be inactive. Plus, as your business grows, keeping every important document as a paper file can become cumbersome. Knowing exactly where those documents are filed will make your life a lot easier when it comes time for planning your exit. If you are running a limited company that is liable to pay corporation tax, the rules on retaining documents are slightly different.

Closing a business is a significant decision, and it’s essential to keep accurate and up-to-date records to ensure compliance with tax laws, regulatory requirements, and insurance purposes. By following the guidelines outlined in this article, you’ll be able to determine how long to keep business records after closing business. Remember to organize and categorize records, shred or dispose of unnecessary documents, and store essential records safely to ensure compliance and protection. As a business owner, it’s crucial to maintain accurate and up-to-date records to ensure compliance with tax laws, regulatory requirements, and insurance purposes. When you decide to close your business, it’s essential to know how long you should keep those records. In this article, we’ll provide you with a comprehensive guide on how long to keep business records after closing business.

Other records may be necessary, too, depending on your state, your industry, and other factors. A small business attorney can advise you on the full list of requirements that are necessary for your business. First, the service pairs you with a CPA who is an expert in your state and industry and can answer the tough questions you have about your business. Second, while many others charge by the hour, or worse, by minute, 1-800Accountant sets you up with an affordable, flat-rate pricing plan so you always know what you’ll be paying.

How to Store Financial Documents

And do not forget proprietary information such as formulas, trade secrets, patent information and designs. Timeero, a mobile workforce management solution, stores all the relevant how long should you keep business records after closing data related to attendance, payroll, mileage reimbursement, and schedules for four years. As data is free of human error, you can rest assured both your business and your employees are protected in this area. With all crucial documents archived and data tracked, you will make your plans and set your goals much easier.

Shredding documents is the main way to protect yourself from identity theft. As a general rule, there are certain documents that absolutely should be shred. This includes anything that has account numbers, birth dates, maiden names, passwords and PINs, signatures, and Social Security numbers. These are the most important that you may need at any time in the future for a variety of reasons. Ensuring that they’re kept in a safe place and that a copy is secure will save you a lot of time when they’re needed. If there’s ever any doubt about whether you should keep a document, keep it.

Digital files offer the advantage of real-time access to information from anywhere. As your business grows, expanding digital storage is relatively easy. But technical issues such as hardware failures can render your files inaccessible, and digital files introduce new cybersecurity risks. 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.