Small business owners have a lot on their plates. Between scaling operations and maintaining quality control to balancing employee morale with production goals, it may seem like a wave of chaos more often than not. When it comes to a seemingly small task like record keeping, it’s often easy to brush it off. However, businesses need to not just pay attention to their records—they also need to save, store, and organize them in case of an audit, dispute, or other possible issues in the future. How long should you keep your business records? Is there a statute of limitations on retaining them? What Types of Business Records Should You Keep? Before diving into how long to keep records, it’s good to know which types of business records are worth keeping in the first place. Businesses have complete control over how they keep records: some may choose to use physical journals and ledgers, while others have migrated to digital bookkeeping. Regardless of your record-keeping method, your transactions will typically involve some sort of supporting documentation such as a bill, invoice, or receipt. Collecting, organizing, and managing these supporting business documents is crucial because they may be needed to substantiate your book entries and tax returns. Below are some of the common types of business records to keep (including the possible format of the record): \tGross receipts: Documents verifying the revenue you earned from your business (sales receipts, invoices, 1099 forms, or bank deposit slips) \tCOGS receipts: Records supporting purchases made by your business directly related to products sold or services rendered to customers (canceled checks, electronic transfer receipts, credit card statements, or invoices) \tExpenses: Documents for other non-COGS expenses related to running your business (credit card statements, cash register tape receipts, or invoices) \tAssets: Records of assets for purchases, depreciation, and gains or losses on sold assets (purchase receipt with price, Section 179 deductions, selling price, or real estate statements) \tEmployment documents: Specific records you need to keep related to employees (W4s, W9s, employment tax documents, reported tips, or copies of filed returns) \tBusiness documents: Other business-related documents worth saving beyond accounting records (Articles of Incorporation, business licenses, or board meeting notes) \tLegal documents: Legal records to defend claims and protect your trademarks or IP (insurance policies, patents, or trademarks) Note: In some instances, you may need to provide a combination of documents to substantiate any claims. Why Should You Keep Business Records? Small business owners would be wise to develop excellent bookkeeping habits. Managing your records—and the supporting documents of those records—efficiently will protect you against any IRS audit, which can happen within a 6-year window. It can also provide you with valuable insight that can help you to run a more successful company. Good record keeping can help small businesses to: \tTrack the company’s progress \tStreamline its financial reporting \tIdentify issues and opportunities \tOptimize tax deductions \tValidate and support tax returns \tProtect the company in the case of an audit How Long Should You Retain Business Documents and Records? Maintaining accurate books and managing supporting business records is an ongoing process that will continue across your business’s lifespan. However, you don’t have to inundate your office with file cabinets and overwhelm your servers with decades of files. The IRS has set some standard retention guidelines for tax records as well as general rules for how long to keep other business records, too. "Generally, I recommend businesses retain all important documents for a minimum of 7 years,” says Karl Swan, tax manager at Rivero, Gordimer & Company. “However, business documents like Articles of Incorporation, copyright and trademark registrations, patents, and other important records should be safely stored permanently. Before destroying any business document, consult your chief financial officer or a 3rd-party financial professional to make sure its destruction is compliant with federal and state laws and regulation." Below are some of the records and timelines for retaining those records as advised by the IRS. \tFinancial records: The rule of thumb for anything finances-related (receipts, invoices, credit card statements, canceled checks, etc.) is to keep those records for at least 7 years. The IRS can audit your business within the previous 6 years, so if you keep these records safe for 7 or more years, you will have them ready if you’re ever audited. \tEmployment tax records: You’ll want to retain all your employee tax records (1099s, W9s, W2s, etc.) for a minimum of 4 years. \tBusiness asset returns: It’s recommended that you hold onto all documents relating to a business asset until a year after the asset is disposed of or sold. \tHuman resources files: There are different recommendations based on the scenario for keeping HR documents. For any active or terminated employee, you should keep files stored for at least 7 years after their termination. For job applicants who were not hired, store their records for at least 3 years. For onsite injuries, you’ll want to retain related records for 7–10 years. \tImportant business documents: You should always save important business documents like your Articles of Incorporation, patent filings, legal correspondence, by-laws, and other legacy business documents. Keeping clean and accurate books is a crucial step in running a successful small business. If you want to take the guesswork out of bookkeeping, consider working with the experts at Lendio. Not only can we simplify your bookkeeping through innovative software and automation, but we also have professional bookkeepers who provide 1-on-1 support with no long-term commitments. Our team can help you to answer financial questions like how long to keep your business records so you can get back to what’s important—running your business.