You’re closing your business. Perhaps you are retiring or entering the opportunity for a different venture. All businesses generate paperwork, and once your business is closed, the question of how long to keep those documents must be addressed.
The Reasons For Keeping Records
Government agencies, such as the Internal Revenue Service and state treasury departments, are the most likely entities that could request various past business documents. Keeping all types of business-related records will be valuable if the need arises to substantiate claims, transactions and information filed on tax returns. Though there is a statute of limitations on many business matters in certain cases such as a fraud investigation or other civil or criminal actions brought against a company, past business records may be required regardless of how long ago the events occurred. You never know when old business records may be useful, so it is advisable to keep all business records as long as it is feasible. That said, there are general guidelines as to the length of time for keeping common documents.
Specific Item Holding Periods
From the date of filing, hold cancelled checks, bank deposit slips, credit card statements and general ledgers for at least three years. Hold bank statements, inventory records, invoices, sales records, cash register tapes, W-2s, 1099s, and other tax filing documents for at least six years. If your business was set up as a corporation, keep monthly and quarterly corporate financial statements for at least three years.
Records To Keep Indefinitely
Store personnel-related payments and associated documents, such as worker’s compensation, pension records and employee income tax withholdings, for as long as you can. If a past company employee files for unemployment benefits, applies for a new job, or has questions dating back to his time of employment, having these records accessible will be most valuable. All corporate-related documents should be kept indefinitely, even though the corporation is no longer in business. Such documents include the certificate of incorporation, board of directors meeting minutes, labor contracts, stock transactions, patents and trademarks, and any court-related documents. Records of corporation assets and accounts receivable and payable should be kept. The IRS’s statute of limitations is three years from the filing date of the tax forms in which to audit returns. As mentioned, however, keeping records proving income and deductions should be retained indefinitely if possible.
Entities That May Request Past Records
The federal agencies that are most likely to request past document information are the Internal Revenue Service, the Department of Labor, the Social Security Administration, the Equal Employment Opportunity Commission and Immigration and Naturalization. Records for state agencies, such as the division of taxation and local municipalities should also be kept as long as possible, even after the business has ceased operation. Store files in a safe place, preferably in a location protected from fire, flood, theft and other loss. Someone other than yourself should also know where these important records are kept.
Dan Keen is the publisher and editor of a county newspaper in New Jersey. For over 30 years he has written books and magazine articles for such publishers as McGraw-Hill. Keen holds a degree in electronics, was chief engineer for two radio stations and taught computer science at Stockton State College.