You may want to hold onto every scrap of paper, just in case you’ll need it in the future. However, holding onto documents for too long puts your business at risk of fraud. This could mean having fraudsters access your account information, client information, and more. Some business documents can be shredded fairly quickly after their use, while others you should hold onto for a while. Here’s a breakdown of common business-related documents and how often you should be shredding them.
Documents You Can Eventually Shred
- Bank and Credit Statements
Hold onto your bank and credit card statements for a year. A lot of financial institutions will have your statements available online. If that’s the case for your business, feel free to shred those statements even sooner. The only time you may want to hold onto these documents for longer is if they are needed to support your tax returns.
- Tax Documents
Keeping your tax documents for at least seven years ensures you have them if you ever need to dispute something with the IRS. This includes both the tax return itself and any supporting documents from that year.
- Human Resource Documents
Keep all personal and employment records for at least one year. This includes job applications, promotions, employee tests, layoffs, even documentation for applicants you didn’t hire. However, accountants and legal professionals often recommend keeping employee records longer—especially if an employee has made a claim against your business.
Under the Age Discrimination in Employment Act (ADEA), employers must keep payroll records for three years. Additionally, records related to employee benefit plans, such as pensions and insurance, must be retained for as long as the plan is active and at least one year after it ends.
- Employment Tax Records
The IRS recommends you keep all employee tax records for at least four years. This timeframe is to protect you as a business if an employee were to question something in the future. Employee documents include employee identification numbers, employee personal information, salary and payment information, employee tax returns, W-4s, and benefit records.
- Property Purchase Documents
Any documentation for business property should be held onto as long as you own the property and for several years after you no longer own the property. This includes purchase and repair receipts for physical land and building real estate, vehicles, and business equipment. While you own the item you’ll want to monitor its worth and depreciation. The one exception is to keep all deeds and titles long term, as they are legal contracts.
- Customer Documents
If you have paperwork with customer information then you should probably shred that too. The first thing to consider is what information your documents have. Then think about how long you need to keep that information on hand, possibly for a future dispute or refund. Regardless of the information, you should always keep private customer information in a secure location. It could be bad news for both you and the customer if that information ended up in the wrong hands.
Documents to Always Keep
- Internal Financial Records
Always keep a copy of internal business records you build and maintain yourself. These include income statements, balance sheets, and cash flow statements. Each of these documents can help you monitor long term business success. Also, they can be helpful for future audits or if customers present questions.
- Business Corporation and LLC Documents
These documents are the foundation to your business and should never be discarded. Instead, keep them in a safe place, and possibly multiple copies. These kinds of documents include business bylaws, articles of organization, shareholder agreements and lists, annual reports, and any trademark, copyright, and patent documentation.
- Legal Contracts
Hold on to any legally binding documents for the long term. This includes any lawsuits or claims made against your business. Also, make sure to hold onto any deeds and titles you own, as well as long-term contracts with vendors and businesses. It may also be a good idea to keep all of your correspondence and documents related to your lawyer, as that may come in handy in your future.
If you have any questions about document retention, consult with your tax or legal advisor.
