How Long Should You Keep Business Records?

By Indeed Editorial Team

Updated September 11, 2021 | Published February 4, 2020

Updated September 11, 2021

Published February 4, 2020

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Keeping accurate business records plays an important role in operating a successful business. Some records must be available for a specific time for legal reasons. For example, the Internal Revenue Service (IRS) may ask for tax-related records dating back as much as seven years. In this article, we discuss what business records are, their various types and how long you should keep certain business records.

What are business records?

Business records are documents that are used to record and store information from a variety of business dealings and operations. Business records may be physical copies of documents that are stored in filing cabinets or document libraries, or they may be digital and stored on computers, virtual clouds or databases. There are two types of business records: active and inactive records. These records have the following characteristics:

  • Active: These records need to be accessed regularly. For instance, your company's policies and procedures or employee timecards for the upcoming pay period are considered active business records.

  • Inactive: These records do not need to be accessed regularly. For instance, any records you keep for historical purposes such as financial or legal records are considered inactive. You may only access them if it is necessary.

Records should be placed into categories–designated by your specific organization–when they are stored for accessibility.

List of business records

There are several types of business records found in an organization. The most common type of business records are:

Insurance documents

Insurance policy documents offer important information about the details of your insurance coverage and deductibles that can protect your business or provide you with reimbursement for certain damages. You may have insurance for different aspects of your company, such as general business liability insurance that protects your business from losses, renter's insurance or even auto insurance. If you ever need to make an insurance claim for any reason, you will need to provide proof that you are covered. For example, you may need to access insurance documents to prove you are covered if your business gets broken into.

Legal documents

Different business structures may have different types of legal documents. For example, a sole proprietor or an LLC will have legal documents or if you own an incorporated company you will have legal documents called articles of incorporation that you will need to keep track of. Keeping these legal documents in your business records will prove that you own your company.

Accounting records

These records are documents of your business transactions. Accounting records will include information about your equity, income and expenses. You will need to keep these business records for several reasons. First, the U.S. government requires you to track your business income and expenses for tax filing purposes. Once you file your tax records, you should keep the tax documents to prove that you have reported your income to the federal government. The second reason is to measure and assess your company's profits over time. This will help you to strategize and determine if you have enough capital to cover certain business expenses.

Bank statements

Bank statements, otherwise known as "operational records", are records of your accounts with banks, which includes checking, savings, credit cards and investments for your business. You will want to keep bank statements to match them with your accounting records to ensure your income and expenses are accurate. If they are not accurate, you will likely notice errors by assessing both record types. Bank statements are also needed for tax filing purposes.

Permits and licenses

Some businesses are required to have permits and licenses to operate a portion of or the entire business. For example, you may need an elevator permit in a residential building that you own and operate or you may need a parking permit to make sure your parking area meets city codes and regulations. Some of these permits need to be posted in visible areas and some of them need to be filed away. Check the permit requirements to make sure you comply with applicable laws. Permits and licenses should be kept up-to-date to show you follow regulations.

Enterprise records

These records are primarily found in enterprises or other similar businesses. These records relate to the daily activities of business. For example, a client list would be considered an enterprise record.

Employee records

These records should have all relevant employee information. This includes employee performance reviews, disciplinary action, correspondence with HR and payroll information.

How long should you keep business records

The length of time you need to keep your business records will vary by the type of business you operate. However, most businesses are legally required to keep particular records for a specific period of time. Here are the most common suggestions for how long you should keep business records:

  • Business tax returns: These records should be kept and filed away digitally or physically until the IRS is unable to audit your tax return. This time period is typically three years after you have filed however, it may be six years if the IRS believes you made a substantial mistake on your return.

  • Employee files: Employee files should be kept for seven years after an employee is terminated, resigns or retires. These records will need to be kept for 10 years if the employee was injured at work or files a claim against the company.

  • Accounting records: These records should be kept for a minimum of seven years. Some CPAs recommend that you keep financial statements, budgets and cash books permanently.

  • Bank statements: Operational records such as credit card statements, bank statements, canceled checks and cash receipts should be kept for a minimum of seven years if they have no other business or tax purposes.

  • Legal documents: Legal documents, such as ownership records, including business formation records, by-laws and property deeds should be retained permanently.

Other common business documents like insurance documents or permits and licenses should be kept until they expire and the expired documents should be stored somewhere until you receive replacement permits, licenses or insurance declaration documents with accurate dates.

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