By: Dale Prosch, CPA
We often get questions from our clients about how long they are required to retain business records. Most of them call after having kept years and years of records and are now running out of physical space to store them. So, here are the simple answers to how long your business needs to store documents.
Records should be preserved only as long as they serve a useful purpose or until all legal requirements are met – that’s the obvious answer, but here are the details you need to determine what records you need to keep and what records can be disposed of.
Business records can be divided into two categories – permanent and temporary. Permanent means just what it says – you must keep these records FOREVER. Examples of permanent records are articles of incorporation, corporate bylaws, minutes of board of directors and stockholders’ meeting, deeds, patents, trademarks, copies of Federal and state tax returns, annual financial statements and retirement and pension plan records. Other records unique to your business may also be added to this permanent list. These permanent records should be stored together in an orderly manner in a fire-proof location.
However, most records are of a temporary nature, requiring retention for a period of seven years or less – and these consume the largest amount of space. These records include sales invoices, most canceled checks, vendor invoices, shipping tickets, deposit slips, and routine correspondence relating to the above matters. A seven year time period for retaining non-permanent records will cover any audits by the IRS or other tax or regulatory authorities.
Non-permanent records should be stored together by fiscal years. For example, all records for the fiscal year ending in 2008 should be stored together. Each storage box should be labeled “2008 non-permanent records – destroy after 2015”.
This records retention schedule is provided as a guide to help you develop a records retention program for your business. Please contact us if you need any additional information.