Exact Answer: 3 to 6 Years
Business records refer to those documents which can be used for future references owing to any reasons. They may be books of accounts or just government certificates to the business organization regarding the conduction of their business duties. They can be summed as those instruments which record an act, a constraint, or an event pertaining to the significance of business.
Apart from official documents, business documents also include minutes of business meetings, memoranda, and agreements of job. Although keeping records is an undisputably boring act, it certainly might help in future litigations and planning the future of the business.
How Long Do We Have To Keep Business Records?
|Type of Business Records||Storage Time|
|Business Tax Records|
|A. Past tax returns||3 years|
|B. Receipts||3 years|
|C. Miscellaneous business records||3 years|
|If IRS finds an error||6 years|
|Payroll Tax Records|
|A. Wages||4 years|
|B. Time Sheets||4 years|
|C. Pension Payments||4 years|
|D. Employment Tax Records||4 years|
|If IRS finds an error||6 years|
|Current Employee Files After Employee Leaves|
|A. In the normal course of business||7 years|
|B. If the employee has an accident and they claim compensation||10 years|
|A. Cash register||7 years|
|B. Invoices||7 years|
|C. Deposit records (both cash and credit)||7 years|
|D. Proof of payments (including cancelled cheques)||7 years|
|E. Bank Records||7 years|
|F. Accounts Payable||7 years|
|G. Accounts Receivable||7 years|
|H. Records related to petty cash transactions||7 years|
|Books Of Accounts||Indefinitely|
|Records Of Ownership||Indefinitely|
The business records of a business organization can be classified into six major types. These are the tax records, the payroll tax records, the employee files, books of accounts, documents related to the operational business of the firm, and the documents related to the ownership of the firm.
Most of the business records are not needed for more than 10 years. IRS requires most records to be stored for only three years. However, if they notice any probable error or fraud in the documents, they make ask the business to store those accounts for more than 6 years. In contrary to this, ownership and financial statements need to be store forever.
Why We Have To Keep Business Records For So Long?
The safekeeping of the business records is essential so that in the future, they can be easily referred to as per the need. Some business records are legally required to be kept for a certain period while some other documents need to be stored for future self-reference of the business.
The IRS is the American body and it mandates the tax records to be stored for three years. In addition to that, if they small any foul, they can also legally ask the business to store it for certain additional periods.
Business records are a crucial deciding element for the management of any organization. It is based on the past activities of the business and their consequences, that the management agrees on the future ones. Thus, the future business records serve as the guiding lights for the business which it needs to store.
On the other hand, there are documents regarding the establishment of the business which is required to be kept infinitely. However, in the true sense, they need to only be stored till the liquefication or dissolution of the business.
The records related to the ownership of the business also play a significant role in the planning of succession of the business. It could be a crucial factor in planning the role of future generations in the firm.
The time for which Business records have to be stored depends on its features.
If it is a tax record, it must be stored for three years. If it is a book of account, it will be needed indefinitely. If it is a record of the operational business of the firm, it has to be stored for at least seven years.
If it is a document relating to the establishment of business, it has to be stored indefinitely. If it is a record related to employees, it has to be stored for seven years.