Did you know that some business records should be kept indefinitely? Even if your records are no longer needed for tax purposes, you may still want to keep for a few years. Such documents may come in handy if you ever apply for a business loan.
That’s not the case with all business records, though. Some papers take a lot of space and don’t serve any purpose. Plus, they may put you at risk for identity theft and data breaches. But how would you tell what to keep and what to shred? How long should you keep your tax returns, bank statements, pay stubs, and other documents? Read on to find out more!
☛ How Long Should You Keep Business Records?
Dealing with piles of documents can be nerve-racking. Even if you choose to go paperless, you may still need to keep certain documents in paper format. Business contracts, licenses, and permits are just a few to mention.
According to the IRS, business owners should keep their tax returns for two years from the payment date or three years from the date of filing, whichever comes last. If for some reason, you didn’t report a part of income, and it accounts for over 25% of your gross income, you should keep those records for six years. Certain records, such as fraudulent return reports, should be retained indefinitely.
Companies with employees must keep all employment tax records for at least four years. If your business owns real estate, store any records related to that property until you sell it.
Incorporation documents, stock ledgers, corporate by-laws, and other ownership records don’t have an expiration date. Store them in a secure location and keep a few copies at hand.
The Illinois CPA Society suggests the following regarding records retention:
- Bank statements — 7 years
- Employee expenses reports — 7 years
- Electronic payments records — 7 years
- Inventory listings — 7 years
- Time reports — 7 years
- Expired insurance policies — 7 years
- Fire inspection and safety reports — 7 years
- Expired contracts and leases — 7 years
- Employment applications — 2 years
- Fixed asset records, general ledgers, and other accounting records — permanently
- Financial statements — permanently
- Insurance policies that are still in effect — permanently
- Legal correspondence — permanently
- Buy-sell agreements — permanently
- Partnership agreements — permanently
- Sales and use tax returns — permanently
This list includes dozens of other business documents, from tax records to personnel records. However, there are plenty of other papers that you can and should dispose of.
☛ Which Documents Should You Shred?
Some documents have to be kept on hand forever, while others can be destroyed right away or after a certain period. Ideally, try to make digital copies of all business records and store them in the cloud.
Check your folders for business documents that contain bank account numbers, passwords, and other sensitive information. Use the above list or call your accountant to help you decide what to keep and what to shred.
Generally, it’s recommended to dispose of the following records:
- Canceled and voided checks
- Bank statements (you can always access them online)
- ATM receipts
- Utility business (keep electronic copies)
- Travel itineraries
- Employee resumes (store them in digital format)
- Business credit reports
- Employee badges that are no longer available
- Employee medical records
- Pay stubs
- Expired credit or debit cards
- Expired warranty documents
- Internal memos
As a business owner, you must keep all records related to your company, staff, and customers confidential. The longer you store these documents, the higher the risk of fraud or data theft. It’s essential to know what to shred and what to keep.
☛ The Importance of Document Shredding for Your Business:
Document shredding does more than just free up space in your office. This practice may also reduce the risk of fraud, helping you prevent a potential lawsuit and hefty fines.
Data breaches are typically associated with digital files, but they may also involve paper records—more than 20% of all data security incidents that took place in 2014 involved physical documents.
Note that trash is considered public property. Therefore, criminals have legal access to any documents you throw away. Sure, they are not entitled to use that information, but nothing stops them from picking up your trash.
Furthermore, companies must protect all private information related to their clients, business partners, and employees. If those records or files end up in the wrong hands, your business may need to pay thousands in damages.
All in all, document shredding is a simple, convenient way to protect your business — and your customers. It also ensures compliance with federal privacy laws and reduces the need for storage space.
This practice may also boost employee productivity. Think about how much time your staff members are wasting when digging through piles of documents to find the information they need.
Additionally, shredded paper is recyclable. This means it can help reduce your carbon footprint and reflect positively on your brand. Nearly 90% of consumers are more loyal to companies that support environmental issues.
☛ What to Keep and What to Shred: Make an Informed Decision”
Knowing what to keep and what to shred can be overwhelming for small and established businesses alike. The best possible thing you can is to consult an accountant and discuss your needs.
With a few exceptions, most business documents can be stored in a digital format. By doing so, you’ll save time, money, and space. Plus, your employees will be able to do their job more easily.
Are you looking for other business tips? See the rest of our blog! We’ll show you how to deal with workplace problems, what to look for in a business insurance plan, and more!