By Matthew Stafford
When you think about retaining records and documents, the first thing that probably comes to mind is an IRS audit. However, there are many reasons for retaining your business documents and records.
A few of them include:
• Income, sales history, and other performance documents may be of interest to lenders you approach for financing.
• Having a clear written history of previous leases, insurance policies, and other contracts may strengthen your position in future negotiations with landlords, insurers, and other vendors.
• If you decide to sell your business, potential buyers will want to review historical records as part of their due diligence.
• If you become involved in a dispute or lawsuit, you might need meeting minutes and written agreements to support your position.
Except for a few guidelines from government agencies, you will not find many hard-and-fast rules about how long to keep your business records. But you can make a plan for record retention by thinking about the purpose of a document and future situations that might arise.
For example, for IRS reporting, most documents must be kept for three to seven years. These records should include accurate accounting and banking records, business loan information, any permits or licenses, business contracts, and insurance documents.
However, business formation documents must be kept permanently. Proper document retention saves time and money in two aspects.
First, accurate documentation minimizes exposure to various tax or regulatory penalties for inaccurate reporting.
Second, accurate documents and records can be valuable evidence in resolving potential legal or business disputes sooner.
You may have storage and accessibility concerns. While physical storage is an option, you may use electronic storage to store digital or scanned documents and emails. Electronic storage is available via a hard drive or using a cloud-based service. Storage on a hard drive is local to the computer alone, and if the hard drive becomes damaged or destroyed, the information may be permanently lost.
Unlike hard drive storage, access to cloud-based storage can be accomplished by saving information or records to the cloud using any computer with an internet connection. However, with internet storage, there is a risk of electronic theft.
Ultimately, it is a business decision to pick which method to use, but it is advisable to use two forms of storage. For example, keep physical copies offsite and use cloud-based storage to electronically save documents as they are received.
Consider contacting AKC Law at 402.392.1250 to connect with one of our corporate and business law attorneys to discuss a personalized business plan.