Whether you are just starting up a new company or have a business that has been in operation for a while, and whether your business is a sole proprietorship, partnership, limited liability company, or corporation, good business recordkeeping is an essential part of running any business.
Here are some business records your company must keep and how long to keep the records for.
Employee Records. If you hire employees for your business, state and federal laws require you to maintain accurate payroll and personnel records.
- Payroll. Under the Fair Labor Standards Act, basic payroll records must be kept for three (3) years for non-exempt (hourly) workers and should include:
- Employee identification data such as full name, Social Security number, address, birthdate for employees younger than 19, gender, and occupation
- Time and day an employee’s workweek begins
- Hours worked per day and total hours worked for each workweek
- Basis on which employees’ wages are paid (e.g., $15 per hour, $640 a week)
- Regular hourly rate of pay
- Total daily or weekly straight-time (non-overtime) earnings
- Total weekly overtime earnings
- Total wages paid per pay period
- Date of payment and the pay period covered by the payment
Records upon which wage computations are based such as time cards, piece work tickets, wage rate tables, work and time schedules, and records of additions to or deductions from wages must be kept for two (2) years.
Employers are also required to maintain payroll records under the Age Discrimination in Employment Act (for businesses with 15 or more employees), the Americans with Disabilities Act (for businesses with 20 or more employees), and the Family and Medical Leave Act (for businesses with 50 or more employees).
- Personnel. The Equal Employment Opportunity Commission requires businesses to keep personnel records for one (1) year:
- Application forms submitted by applicants
- Records dealing with hiring, promotion, transfer, lay-off, or termination
- Rates of pay and compensation
- Selection for training or apprenticeship
- Additional records about vacation and sick time, and attendance information, must be retained for three years.
- Benefit plans. The Employee Retirement Income Security Act requires benefit plan (retirement, health and wellness programs) documents be kept for six (6) years.
Tax Records. The business you operate, the number of employees you have, and where you do business dictate the different records you must keep. For federal tax, your books must show your gross income, and your deductions and credits. You will need to retain supporting documents for purchases, sales, payroll, and other business transactions. The documentation must show your gross receipts, inventory, expenses, and assets.
These records must be kept for as long as they may be needed for the administration of any provision of the Internal Revenue Code. That means until the period of limitations for that tax return runs out. Generally, the period of time to keep tax records is three (3) years unless you fail to report income that should be reported, did not file a tax return, or filed a fraudulent return. In those cases, the law applies longer limitation periods. For employment tax records, retain for at least four (4) years after the date the tax becomes due or is paid.
Tax Returns. Retain forever. Usually the limitations periods mentioned above begin to run when the tax return is filed with the taxing authority, e.g. IRS or the Florida Department of Revenue. To prove you filed the return, a signed copy of the return with a proof of mailing or filing online is indispensable.
Injury Reports. For many businesses with ten (10) or more employees, the Occupational Safety and Health Administration requires records showing serious work-related illnesses and injuries to be retained for at least five (5) years. Also, employers must complete and post a summary annually, even if no serious illnesses or injuries occurred during the year. Certain low-hazard industries are partially exempt from these requirements.
These illnesses or injuries are considered serious:
- Work-related fatalities;
- Work-related injuries or illnesses that cause loss of consciousness, missed work days, work restrictions, or transfer to another job;
- Work-related injuries requiring treatment beyond first aid; and
- Work-related cases of cancer, chronic irreversible diseases, fractured or cracked bones or teeth, and punctured eardrums.
Special recording criteria are in place for work-related needle sticks and sharp injuries, medical removal, hearing loss, tuberculosis, and musculoskeletal disorder cases.
State Business Recordkeeping Requirements for Business Entities. State laws governing various forms of businesses, such as partnerships, limited liability companies, and corporations, require that each business maintain certain records and file periodic reports. For example, a partnership must maintain an accurate list of the names and addresses of the partners, the partnership agreement, income tax returns, financial statements, and other documents dealing with the business.
Licenses and Permits. Most businesses must have a license or permit to operate lawfully under local, state, or federal law. For example, hairdressers, physicians, and attorneys must have professional licenses, businesses that sell goods or services must obtain a sales tax license or permit, and some federally regulated industries such as aviation, alcohol, or agriculture must obtain federal licenses or permits.
We Are Here to Help
As business attorneys, we can provide guidance to help your business comply with its obligations and avoid fines and penalties. When you need help navigating the requirements of federal, state, and local law or have other questions about operating your business, please contact us at 813-852-6500.