Successful businesses have several things in common. Their owners ensure that business records are intact and well-maintained.
Software and electronic files are regularly backed up, payroll records and employee information is secure from prying eyes.
The business has a disaster recovery plan in place to protect business operations and important electronic documents.
Successful businesses understand the legal risks of not saving certain types of files because they know they are responsible for the burden of proof in all legal or tax matters. Keeping good records is fundamental in a successful business.
This article helps you determine which documents you should include in a Records Management Plan, how long you should retain them, and some things to consider for each type of Record or Document.
What Documents and Records Should be Managed, Scanned, and/or Destroyed in your Records Management Plan?
Here’s a short list of records that should be kept long-term for any sized business. If you’re running out of room in your filing cabinets, you should consider contracting with an offsite records storage company to help you store inactive files securely that can be accessed at any time.
Business Organization Documents
Business organization documents, such as charters, bylaws and constitutions need to be kept as long as the business is in operation, if not permanently.
Fictitious business names, corporate, partnership, limited liability corporations and other organization documents need paper or electronic records permanently stored for the life of the business.
By keeping these documents available, the business owner avoids the risk of lawsuits or other legal issues that may arise when questioning the company’s ownership and organizational structure.
It’s a good idea to keep copies of annual reports for your business indefinitely. These reports summarize the business’ activity for the year and help to prove the businesses position for any prior years.
The IRS indicates that businesses need to keep records as long as they need to use them to back up tax returns, audits and more.
When your business involves providing stock to the public, it needs to keep the documents issued by the U.S. Securities and Exchange Commission that provides it the authority to issue stocks permanently.
This prevents any legal issues that could arise if the government asks for these documents and you don’t have them.
Companies that have boards and regular board of director meetings need to keep copies of all board minutes indefinitely.
These records provide detailed information on what took place during the board meeting, voting records of important decisions and other pertinent information.
Along with the important information stored in these documents, it helps to avoid legal issues that could arise about previous voting records or other important decisions.
Public companies need to keep records of stock issued, stock transfers and stockholder information permanently. Any legal disputes that arise about who owns what part of the company or stock are easily resolved when these records are kept.
When they are not, a business could spend years in legal battles sorting out issues that could have been easily resolved by retaining these important documents.
Financial Brokers or Investors
For businesses that deal in the stock market, the Securities and Exchange Commission requires the business to keep detailed records of all financial transactions. This includes account statements, trade confirmation, cancelled checks and other documents related to investments and trading.
A broker or financial investment officer might be penalized by government agencies for not keeping these records on hand and available for the required periods, in some cases up to six or seven years.
Accounting and Financial Statements
Every business needs accurate accounting records and financial statements in case of an IRS audit. An IRS audit can go back several years.
Without these documents available, a business has no way to prove expenses or deductions.
When you can’t prove or back up your tax returns through your accounting records or financial statements, your business might be subject to additional taxes, fines and penalties.
In addition to financial statements and accounting records, businesses need to keep copies of receipts associated with expenses. This is especially true when it comes to travel expenses, employee educational reimbursements, meal and entertainment expenses and receipts for business automobiles.
By keeping records on hand the required amount of time, usually up to seven years, your business can avoid the risk associated with IRS audits, fines and penalties.
As long as the business is operational and has employees on staff, payroll records need to be kept indefinitely. Besides keeping these documents on hand, the employer needs to ensure they are secure from those who aren’t allowed access to them.
Employee’s private medical insurance information, tax records, social security number and all payroll information needs to be retained by the business.
By having these available, the small business can avoid any issues or risk associated with payroll. The IRS requires employee tax records be kept for at least 4 years, if not more.
It doesn’t matter if a business’ record-keeping practices include moving paper documents to electronic formats. The requirements for electronic documents are the same as paper ones.
By scanning documents electronically, a business can reduce its need for added record-keeping storage space.
While it is important to keep specific documents in paper format for ease of use, a business can save money by moving its papers files to an electronic means of storage.
Bank Statements and Check Registers
To substantiate financial transactions of the business, keep bank statements and check registers for the life of the business.
Check registers can easily prove a check was issued and a business expense incurred.
Destroy these records only if you decide to close the business, but keep them available until the business is no longer at risk of an IRS audit.
Get Free Quotes on Records Storage & Retrieval Services
Information governance is an ever changing field as federal and state laws require more retention and faster discovery. We can help you manage your hard-copy documents, and even guide you through the transition to a paperless office.
Our experts can help you maintain your storage needs regardless of format. Let us help you find the right document storage solution for your business.
To get free, no obligation quotes from a records management company in your area, fill out the form on the top right of this page, or give us a call at (866) 385-3706.