Many law firms and small business owners will ask what records can we destroy and how long do we need to keep business records? Good questions.
What are business records?
Business records are defined as:
Any recorded information, regardless of medium or characteristics, made or received and retained by an organization in pursuance of legal obligations or in the transaction of business.
– ARMA International
In simple terms, this means any information your business has created or received that documents a business transaction or obligation. Examples of business records are:
- Bank statements
- Insurance documents
- Personnel Files
- Matter files
Why do you need to keep business records?
Is it OK to shred your business records once the business task is completed? Well, business records are normally kept to:
- Prepare tax returns and financial statements
- Proof of compliance with local business license and permit requirements
- Proof of compliance with employment regulations
- Proof of insurance
- Confirm business transaction was completed
- Proof of purchase
Destroying records before their useful life is complete can mean unnecessary business costs and fines. There are legal and financial requirements that need to be considered before destroying business records that varies according to the type of your business and the jurisdictions where you conduct business. And, if your firm has any business records relevant to a pending lawsuit, you cannot destroy them without risking jail and fines and not to mention making your business look bad. If you are a law firm, you may need to notify your client before destruction of matter file records.
When you do destroy business records, be sure to do it the right way.
Shred confidential paper documents versus ripping them in half and throwing them away or placing them in the recycling bin. You do not want thieves to reconstruct sensitive information.
For electronic records, consider the following methods to destroy electronic records:
- Deletion: this is the most common method, where you use your computer’s native delete functionality to get rid of electronic records. You can use this method for non-sensitive information. There is a risk that files not overwritten can be recovered.
- Overwriting: this is another common method where you overwrite the computer media with “1”s and “0”s so that the records cannot be recovered.
- Physically destroying computer storage: this can be done by breaking the storage media whether manually or by contracting a service provider to pulverize the media.
Be sure to keep a destruction log of business records destroyed. Include on the log:
- Business records name (Bank Statements, Receipts, etc.)
- Inclusive Dates (1/1/2019 to 12/31/2019 or 2019)
- Person Authorizing Destruction
- Destruction Method (Shred, Delete, Overwrite, etc.)
- Destruction Date
You can reference this log if there is any question if or when a business record has been destroyed.
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