How long should you keep business records after closing

As a business owner, you likely have in storage various documents, such as tax returns, personnel records and bank statements. Unfortunately, there isn’t a steadfast retention rule that applies to all kinds of records, meaning you need to categorize your files and create a document retention policy (DRP).

Once you know what types of records you have, it’s time to figure out how long to keep tax returns, statements and other documents. Below, we’ll go over legal retention requirements and best practices for records not covered by federal or state laws.

Federal record retention guidelines: Who regulates record keeping?

Several federal agencies have document retention requirements. The guidelines may vary depending on your industry and circumstances. It’s essential to understand which categories apply to your company to know what documents to keep.

In general, the following laws, acts and agencies require record retention:

• Internal Revenue Service (IRS).
• Federal Insurance Contributions Act (FICA).
• Americans with Disabilities Act (ADA).
• Age Discrimination in Employment Act (ADEA).
• Occupational Safety and Health Act (OSHA).
• Employee Retirement and Income Security Act (ERISA).
• Civil Rights Act of 1964.
• Fair Labor Standards Act (FLSA).
• Family and Medical Leave Act (FMLA).
• Equal Employment Opportunity Commission (EEOC).
• Health Insurance Portability and Accountability Act (HIPAA).
• Federal Unemployment Tax Act (FUTA).

Your state and local government may have stricter guidelines. Some external agencies, such as the Payment Card Industry Security Standards Council (PCI SSC), require businesses to keep documents for PCI compliance.

How long should I keep business documents?

Document retention guidelines typically require businesses to store records for one, three or seven years. In some cases, you will need to keep the records forever. If you’re unsure what to keep and what to shred, your accountant, lawyer and state record-keeping agency may provide guidance.

Several federal agencies have document retention requirements. The guidelines may vary depending on your industry and circumstances.

Use the following information to guide your document retention policy:

• Legal documents: It’s best to keep business formation records, deeds, patents and trademark registrations, property appraisals, bill of sale documents and other ownership records indefinitely.
• Business federal tax returns: According to the IRS, tax returns should be kept for three to seven years, depending on the situation. But, if you don’t file a return, the IRS recommends keeping “records indefinitely.” Keep federal tax returns, including payroll tax records, for seven years to stay on the safe side.
• Personnel records: Refer to the federal record retention guidelines for a precise breakdown of requirements. For instance, documents relating to exposure from harmful agents must be kept for 30 years after employment ends. In contrast, you need to keep OSHA accident forms for five years after the incident.
• Payroll information: The FLSA requires employers to keep payroll records “for at least three years.” In addition, all companies covered by federal anti-discrimination laws must retain records showing your reasoning “for paying different wages to employees of opposite sexes in the same establishment.”
• Accounting documents: Retain all small business accounting records applicable to your taxes, including depreciation schedules and year-end financial statements, for at least seven years. Your certified public accountant (CPA) may recommend keeping accounting records indefinitely.
• Insurance, permits and licenses: Keep all permits, licenses and insurance policy documents until you receive replacements for expired ones.
• Bank statements: All business banking, credit card, and investment statements, as well as canceled checks, should be kept for seven years, possibly longer, depending on your business or tax circumstances.
• Hiring records: Keep job advertisements, applications and resumes on file for at least one year.

[Read more: A Quick Guide to Data Management, Protection and Storage]

What are document retention best practices?

After you’ve reviewed federal rules and your state’s document retention schedules, you may still have records that you’re unsure about. In this case, the Uniform Preservation of Private Business Records Act (UPPBRA) is a good guideline.

Some states, including Texas, Illinois and North Dakota, have adopted this standard. It says businesses should keep records not covered under statute-specific retention periods for at least three years.

Next steps: create a document retention policy

Organizing your physical and cloud-based storage along with developing a DRP is the best way to ensure your organization complies with record-keeping standards. Review all guidelines carefully and come up with a plan that’s easy to implement and stick with.

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Published October 07, 2021

According to the Internal Revenue Service, the required length of time to save business documents varies depending on what the item is and when the period of limitation on that item runs out. The minimum holding requirement for any document is two years, but there are some that must be kept permanently. If you've ever filed a fraudulent tax return, you must keep all records indefinitely.

Accounting Records

1. Financial records such as the accounts payable ledger, balance sheets, check register and general ledger will need to be kept permanently. Other records such as cash receipts, dividend checks, cost accounting records and accounts receivable invoices and ledgers will need to be kept between five and seven years. In addition, records such as bank statements, accounts payable invoices, payroll checks, canceled checks, earnings register, expense reports and labor cost records will need to be kept between two and three years.

Tax Records

1. With taxes, the length of time to keep records also varies. For example, annuity and deferred payment plans, depreciation schedules, dividend registers, inventory reports, tax bills and statements, tax returns, sales tax returns and pension returns will need to be kept permanently. Payroll tax returns will need to be kept at least seven years. Also, employee withholding, excise exemption certificates, manufacturing excise reports and retail excise reports will need to be kept for a minimum of four years.

Personnel Records

1. The recommended length of time to keep personnel records also varies. Records such as injury frequency charts and health and safety bulletins should be kept permanently. Accident reports, injury claims and settlements should be kept for 30 years. Employee insurance records should be kept for 11 years. Attendance records should be kept for seven years. Employee contracts should be kept for six years. Garnishments, applications and terminations should be kept for five years. Fidelity bonds should be kept for three years. Also, job descriptions, rating cards and time cards should be kept for two years.

Corporate Records

1. With the exception of surety bonds that need to be kept for three years and administrative records that need to be kept for 10 years, all other corporate records need to be kept permanently. The category of administrative records typically includes audit reports and classified documents. Common examples of corporate records include annual reports, authority to issue securities, capital stock ledger, charters, constitutions, bylaws, contracts, corporate election records, incorporation records, stock transfers, insurance policies, patents, trademarks and copyrights.