Record Retention: How Long to Keep Business Records

Why practice proper record retention?

As a small business, it’s easy to grow lax with practices like record retention. We understand. As a small business owner, you’re not exactly flush with free time. It’s tempting to push document retention aside, reasoning “I’ll do it later” — only to find that the “later” you promised yourself never arrives.

But setting up a proper record retention plan is time well spent. Here’s why.

Take the stress out of tax filing season.

Do future you a favor: practice proper record retention now so that come tax season, you won’t be digging through documents looking for items your CPA requested. When you know exactly where to file and find financial documents, there’s no need for the panicked Slack message to your team, “Anyone know where we put our contractor W9s? Our bookkeeper needs them today!”

Be ready for an IRS audit.

Should an IRS audit letter land in your mailbox, practicing good recordkeeping now will make an unpleasant process a little bit smoother. In many cases, the IRS will request certain documentation as part of the audit. With the help of a good document filing system and your trusted CPA, you can survive an IRS audit.

Set yourself up for a successful exit

Hoping to sell your business or pass it on to the younger generation?

For a business valuation, you’ll need access to important documents like:

• Financial statements from previous years
• Company tax returns for at least three previous years
• Ownership agreements
• Leases

Knowing exactly where those documents are filed will make your life a lot easier when it comes time for planning your exit.

What are best practices for record retention?

Choose your medium.

Electronic or paper copies? Which one is best? While old school types may prefer paper, there are many secure cloud storage systems available that keep your data safe and make finding documents as simple as using a search bar.

Plus, as your business grows, keeping every important document as a paper file can become cumbersome.

Create a standard protocol across the organization.

Just like your services and marketing activities may have Standard Operating Procedures (SOPs), your internal document filing process needs its own SOP. In this SOP, you’ll need to outline how and where important documents will be saved.

If you are storing documents in a cloud storage system, include a standard for file naming conventions. For example, if you have some P&L statements file names formatted as “P&L Nov 2024” and others as “02.01.25 Profit and Loss,” you may be setting yourself up for a treasure hunt when it comes to searching for files in the future.

Limit access to only those who need it.

While you may trust your team members, you should still limit access to sensitive files to only those who need it. Many online secure filing systems log the timestamp of users who access certain documents, so you can keep a steady paper trail of user access.

Don’t be dependent on one individual.

You may have heard the horror stories: one employee saves important documents to their desktop, only to leave the company and — in turn — the company loses access to those documents. Cue the IT nightmare in attempting to recover the files.

That’s why it’s important to create a business-wide Standard Operating Procedure that all necessary employees learn as part of the onboarding process. You don’t want to be dependent on one employee for important document storage.

How long should you keep business records?

Do you have to keep every document forever? Some, yes, but others can be securely discarded after a set period.

We recommend the following:

• Bank statements: 7 years
• Bank deposit slips: 3 years
• Purchase orders: 7 years
• Financial Statements: Permanently
• Articles of Incorporation: Permanently
• Owner Contributions: 7 years
• Checks for payroll: 7 years
• Vendor invoices: 7 years

For a complete list of records and how long to keep them, download our PDF guide here.

Note: Some industries have different standards for how long to keep certain business records. Talk with your CPA for guidance specific to your industry.

Build a record retention policy with the help of Landmark CPAs

At Landmark CPAs, we can help your business create a proper record retention plan as part of our business consultant services.