In the not so distant past, every thriving business needed to keep a "paper trail," important documents that you could access quickly for legal or customer service reasons. Since so much business is now done digitally, many of your business documents are stored on company computers or in online "clouds."  You may still have filing cabinets full of papers, however. You may be confused about whether you need to keep up these files. In a largely paperless world, what paper business records do you actually need to keep and safely store and what can you shred?  

Tax Records

Most experts urge you to keep copies of your tax records and supporting documents for several years. You should never shred the actual returns, but you can get rid of the receipts, invoices, and other documentation after three years, the period when the IRS can begin an audit. The IRS recommends keeping these records for seven years if you claim a bad debt deduction or a "worthless securities" loss. They also advise you to keep employment tax records for four years after you pay the tax or it becomes due, whichever is later.  Surprisingly, they even offer this advice, "Keep records indefinitely if you file a fraudulent return."  When you do get rid of any tax papers, you should shred them to protect yourself from identity fraud, preferably with a machine that turns them into confetti or at least cross-cuts them. Thieves can tape ribbon-cut documents back together. 

Business Documents

Other documents that you should keep are those that give your business the legal right to function, including articles of incorporation and tax-collection permits. You should keep copies of all business agreements, including vendor contracts and information on employee benefits. Although some of these documents can be scanned and stored in computers, keeping the original, signed copies of contracts is always advisable. 

Shredding

Feel free to shred credit card receipts, bank deposit slips, and ATM receipts after you have balanced your accounts each month. You may also shred any monthly bill that you will not need to prepare your next tax return. Shredding non-essential documents will actually protect you and your business from fraud.

Even though you may keep many of your records online or on secured computers, you still need to store some business documents for extended periods of time. For those items, select heavy-duty storage cabinets that can protect them from damage. Use a shredder on those paper items you do not need to keep.