Thanks to digital technology, record retention is easier and cheaper than ever before. Nevertheless, a lot of business still gets done using old-fashioned paper, and it is essential that you hold on to key business documents.
As a small-business owner, you will accumulate plenty of these things. Some are important; others, not so much. Here’s a guide to the paperwork you should protect as if your business depends on it. Chances are, it does.
1. Origination documents — You should save all documents related to the formal structure of your company for the life of your business. These include articles of incorporation, your EIN paperwork, and bylaws. Also, if you have one of the more complicated business structures, keep paperwork related to company stock, stock options, and warrants indefinitely.
2. Employee records — At some point, you may hire somebody you wish you hadn’t. When it comes time to remedy that situation, you will want to have all of your human resources documents available. These include all employee applications, contracts or offer letters, handbooks, personnel records, W-2s, and termination letters. If an employee sues, the more paperwork you have, the better (generally speaking).
3. Intellectual property — Intellectual property is anything that you invented. That could be a product, a song, or even ideas you haven’t made into products. If you protect your intellectual property through patents, copyrights, or trademarks, hold on to the paperwork. If you write formal plans or drawings prior to the patent, keep anything that shows when the idea originated. Patent infringement lawsuits are widespread, making documentation of your ideas crucial.
4. Vendor contracts — Vendor contracts will probably change over time. Having a written baseline showing where you started is helpful for future negotiations. Save these contracts indefinitely.
5. Tax documents — You need to retain all tax-related documents for at least six years, but it’s better to keep them in digital form for posterity. If you think that a document might be tax-related, keep it. As you gain experience, you’ll get better at knowing what to retain. If you’re unsure, consult a bookkeeper or tax professional.
6. Other paperwork —
So, what do you do with those miscellaneous business documents that don’t seem to fit neatly into a specific category? Err on the side of caution. Hold on to all receipts, invoices, canceled checks, refund confirmations, and any email or other correspondence related to your business until it becomes clear that you no longer need them.
Finally, if you don’t own a scanner, get one. For as little as $40, a scanner allows you to make digital backup copies of important papers. (Mobile phone apps also exist that allow you to create PDF files from photos of documents.) When in doubt, scan and keep materials — and shred any sensitive ones.