08.01.2015 | Berdon Business Advisory Services
Knowing What Stays and What Goes and When.
JUST HOW LONG DO YOU NEED TO KEEP RECORDS? Do those ledgers and cancelled checks have to pile up forever? What about correspondence? Legal documents? Tax returns? Emails? Electronic documents? While there is no quick answer to these questions that’s right for every business, you can develop a practical record retention system that will improve efficiency, produce cost benefits, and meet regulatory and legal requirements.
Once you do, distribute it to all your employees, with clear guidelines on rules and responsibilities for record identification, retention, protection, retrieval, and disposition. Consistent application is the most important aspect of your record retention policy.
Record retention policies can be inferred from statutes of limitations and laws regarding the availability for certain documents, which vary from state to state. You can eventually destroy most, but not all, documents. Storing documents electronically may achieve dramatic reductions in retrieval costs and space requirements; however, electronic documents are still subject to record retention policies. Certain important paper documents such as the agreements noted below, which are permanent in nature, should be preserved physically and can also be stored electronically for easy access and referral. Your IT department should periodically make backups of all the information on your network – including emails, word processing documents, spreadsheets, and other electronic documents. IT should also routinely purge electronic documents just as you would purge paper documents.
Some documents – especially those that establish your business and record its ongoing progress — should be kept permanently. Regardless of industry, you should always retain:
- Articles of incorporation
- Partnership agreements
- Licenses from government authorities
- Capital stock and bond ledger
- Canceled stock and bond certificates
- Annual financial statements
- General ledgers
- Minutes from partner or stockholder meetings
- Legal correspondence
- Firm tax returns and work-papers
- Copyright agreements
- Bills of sale
- Deeds to property
- Title searches
- Your employee manual
- Contracts with present employees
- Payroll records (W-2s, 941s, journals, ledgers)
- Personnel data
Here is a guide for when to dispose of other documents. Keep in mind that your business is unique and you may want to adjust these timeframes to your own needs and to federal and state requirements for your industry. When in doubt, consult your financial advisor or your attorney.
|Type of Record||Retention Period (years)|
|Accident reports and claims||7 after accident or settlement|
|Canceled checks, bank statements, deposit slips||7|
|Correspondence||1 + current|
|Daily cash reports, remittance advices, bank deposit slips||1|
|Disability benefits||4 after expiration or settlement|
|Discrimination charges by employees||7 after settlement|
|Employee contracts||7 after termination|
|Employee medical history||
3 after termination
|HR and related correspondence||6 plus current year; longer for some supporting documents|
|Individual tax returns||7 from date of filing or 1 year after termination, whichever is longer|
|INS 1-9 forms, to comply with Immigration Reform and Control Act||10 after expiration or settlement|
|Insurance documents, including policies, reports, claims and coverage information||7|
|nterim financial statements||10 after termination|
|Leases and contracts||7|
|Other periodic financial reports||10 after expiration or settlement|
|Payroll data and authorization||7 after termination|
|Personnel counseling records||7|
|Personnel data, applications, and contracts – former employees||7 after termination|
|Applications for positions, resumes, or other job advertisements and replies||7 after termination for employees; 1 after completion of selection process for others|
|Documents relating to promotion, demotion, layoff, or discharge of an employee||7 after change in status|
|Salary rates and changes||3 after termination|
|User manuals for equipment and software||Until disposition|
|Vendors’ invoices and petty cash slips||7|
|Warranties and service agreements||1 after expiration|
Once a financial document has outlived its useful life, see that it is destroyed in a way that would prevent it from being retrieved and used for other purposes. Look into contracting with a qualified document shredding service. For electronic documents, not only the network but the backup media need to be purged to be consistent with the record retention policy.
If you have any question about the proper retention and disposition of your personal or business record, contact your Berdon advisor or Robert Sattler at 212.331.7518 or firstname.lastname@example.org.