Every business, regardless of its size, needs a system for retaining important records. Records are vital for tax filing, legal compliance and planning. These FAQ's will help you understand the basic concepts of small business record keeping. Document retention requirements may vary by state and industry; call your LegalShield provider law firm to learn more about what is required of your business. (Vantage is a LegalShield provider)
* Why is record keeping important? Preserving records on employees, customers, sales, inventory, contracts, insurance and other aspects of your business will help you track vital information about your business, file taxes in a timely and accurate manner, stay compliant with regulatory agencies and plan for the future. Your records will also be useful if your business is audited or involved in any type of litigation.
* Which records should I keep? There are a wide range of records your business should retain; some are required by law while others help your business function more efficiently.
o Original Copies of any Permits or Licenses
o Articles of Organization, Incorporation, DBA or other State Business Registration Forms
o Sales Records
o Expense Records
o Customer Records
o Tax Returns, Bills and Statements
o Inventory
o Payroll and Personnel Information (including but not limited to)
- Job Descriptions
- Hiring Documentation
- Employee Evaluations and Performance Records
- Time Sheets
- Withholdings
- Benefit Information
- Workers' Compensation Documents
- 1099 Documents for Contractors
o Insurance Policies
o Original Signed Copies of any Contracts, Agreements and Leases
o Patent, Copyright or Trademark Documents
o Depending on your business, there may be other records that you should retain. Consult with your LegalShield provider law firm if you have questions.
* How long should I retain records? The IRS, state tax authorities, regulatory agencies and contract terms may stipulate retention schedules for specific types of documentation. Talk to your LegalShield provider law firm to find out more about what may be required of your business. Develop a written retention policy that includes a schedule for keeping various types of records, as well as policies for safe and secure document disposal.
* Do I need to keep my own personal financial records? It is vital, particularly for small business owners, to keep accurate personal financial records. While a sole-proprietor's personal finances may be directly tied to their business, other business entities, such as LLCs and corporations, must keep a barrier between personal and business accounts. If a business is audited and it is found that this barrier was not properly maintained personal records may be subject to scrutiny. In addition, small business loan applications often require the business owner's personal financial records.
* Should I hire a professional to help me manage my record keeping? This depends largely on your resources and the complexity of your records. In some cases, such as payroll and accounting, it may make sense to employ a payroll service or accountant to manage your filings and record keeping. Payroll record keeping requirements and tax filings can be extremely burdensome for small business owners. Using a contractor will save you the trouble of keeping up with changes in the law and dealing with a substantial amount of paperwork.
* What if I can't afford to hire a professional? Find a solution that fits your budget. There are many different options for accounting and document management software in a wide range of prices. No matter what system you select for record keeping it is important to begin using it as soon as possible. Waiting to begin sorting your records will leave you with a disorganized mess that will grow more difficult to manage each day.
Can I store all of my business records on a computer? In some cases, such as signed and executed contracts and lease agreements, you should retain original paper documents. Most documents can and should be stored electronically. Even if you are required to retain a hard copy, having a digital file will serve as a backup. Electronic filing systems require far less space to store data and make filing, organizing and searching for documents much easier. If you store documents electronically make sure you complete a daily offsite or online backup of your records. Cloud storage offers a combination of secure offsite storage and accessibility. If you need assistance speak with an IT professional.
