How Long Should You Keep Your Business Documents?

Organization is tough for many of us, even in the digital age. Business owners may have as many paper records as they do digital ones, which makes staying organized feel like even more of a chore. The longer you’re in business, the more records you accumulate, until you have to start asking how long you need to keep certain business documents.

Navigating business compliance is an ongoing gauntlet, and knowing how long to keep specific documents isn’t just about saving space; it’s a critical component of risk management, audit defense, and legal compliance. That’s why a formal document retention policy can help your business keep documents the right amount of time.

Tax Documents

The main reason you should retain tax documents is because of the Internal Revenue Service (IRS) statute of limitations for auditing you and assessing additional taxes. The general rule of thumb is to keep the majority of tax-related documents for three years. This applies to general tax returns and all supporting documents for deductions, credit claims, and general expenses.

However, if you fail to report more than 25% of your business’s gross income, the IRS can audit your return for up to six years after filing. Whether you’ve knowingly underreported or are concerned you may have made a mistake, you should hold onto any records related to income, sales, and general business revenue for at least six years after filing to reduce audit risk.

Any records that establish the financial history or tax basis of an asset you should keep indefinitely. This may include:

• Property records
• Equipment records
• Investment records
• Asset records like deeds, purchase agreements, permanent improvement records, and depreciation schedules

You should keep these records for the entire life of the asset, plus the standard three-year audit window after the asset is sold, disposed of, or becomes worthless.

Permanent Records

Some records must be kept indefinitely or permanently because they define the structure and history of your business. These include:

• Legal formation documents, such as:
  • Articles of Incorporation/Organization
  • Company bylaws
  • Stock ledgers and meeting minutes of the Board of Directors
  • Active legal contracts
• Patents, trademarks, and intellectual property records of application, registration, and maintenance

You’ll likely reference these permanent records several times throughout your business’s life around tax season, when applying for loans, and more.

Human Resources (HR) and Payroll Records

Retention periods for HR documents are strictly regulated by federal and state labor laws. These records tend to be governed by overlapping rules from the IRS, the Social Security Administration (SSA), and the Department of Labor (DOL).

Here’s how long to keep specific types of records:

• 4 years: payroll tax returns (Forms 941, 940), records of tax deposits, and total wages paid.
• 3 years: Detailed employee records, including time cards, calculation of pay, additions/deductions, and wage rate schedules.
• 1 year: Employment applications, resumes, interview notes, and general personnel files after termination or after the date of a decision not to hire.

I-9 Forms have a hybrid rule that states they must be kept for three years from the date of hire OR one year after the date the employee is terminated, whichever date is later.

Using a dedicated HR software is one good way to help ensure compliance with these document retention periods.

General Business Records

Outside of federally mandated periods, general business accounting records usually follow a common seven-year retention cycle. Accounting records like purchase orders, non-major sales invoices, accounts receivable and payable documentation, and bank statements/canceled checks should be kept for this time to ensure you wait out the IRS audit window. An accounting software can help with this.

Major contracts, you should keep for the entire life of the contract, plus an additional seven years after it has expired or been terminated. That will enure you cover any potential statute of limitations for breach of contract lawsuits.

Best Practices for Document Retention

Staying on top of your business documents requires some time and attention. Some best practices include:

• Keep a formal policy: A document retention policy ensures consistency by providing clear guidelines for all employees and helps defend against claims in court by demonstrating that any document destruction was routine and not malicious.
• Leverage digital tools: The IRS accepts scanned or electronic copies of business records, so there’s really no excuse not to digitize your records. Use a document management software to index, preserve, and reproduce records reliably.
• Secure disposal: When documents reach the end of their lifecycle, they must be destroyed securely and consistently. Securely destroying documents maintains confidentiality and compliance with data privacy laws. Always maintain a log of document destruction dates and methods.

These best practices will help you stay on top of tax and legal compliance requirements and reduce your risk of litigation.