Document retention is an important concept for most businesses. Keeping documents will help keep a company compliant by law. The rules for document retention vary based on the reason for the retention. The two main retention reasons include taxes and Securities and Exchange Commission (SEC) regulations. SEC regulations only apply to public companies.
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The accountants who audit public companies must keep work papers from the audit for seven years. Companies being audited should try to keep any records related to the audit for these seven years in case there is any problem with the accountant's records. After seven years, the SEC can no longer bring a case against the company in relation to the records and upholding Section 802 of the Sarbanes-Oxley Act of 2002.
The Internal Revenue Service (IRS) has various rules for document retention. The length of time you keep records will depend on the possible violations that may occur. For example, if a company filed a fraudulent return, then the company should keep records indefinitely. If the company filed a return and may need to owe additional tax, then they only need to keep the records for three years.
There are other rules regarding document retention that the company should be aware of. Each person or company that has some type fiduciary relation can impose document retention rules. For example, if a company obtains a loan, the lender could require the company keep all records for the life of the loan. It is important to review each financial institution for their document retention policies that apply to the company.
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