We are frequently approached by company owners with the question of how long business records should be maintained. While the answer to how long a business should keep its particular records is not an easy question, there are several considerations that should go into the decision.
First and foremost the business process needs need to come first. For example, if a business needs to reference its communications with clients or its previous designs for many years, those needs should outweigh the desire to reduce the records maintained by a business to clear out clutter.
Many suggest that seven years is a good starting point when deciding how long to keep business records. In Michigan the contract statute of limitations is six years so it makes sense to use seven years as a starting point if there is no longer any liability associated with a contract the business might have formed. If, however, a business’ contract negotiation process extends for a long period of time, there may be a good argument to keep records for an even longer period of time. The length of for keeping records will obviously depend on each business’ processes.
Whatever the length of time decided upon it is extremely important that a business document its retention policies in a written document that can be referenced and produced if there are any questions about why a particular document was destroyed.
What is a Document Retention Policy?
Any document retention policy must identify several things. First it needs to identify the category or type of document involved. For example, a manufacturing company might have correspondence, designs, shipping documents and financial documents as types of documents they maintain.
Secondly, the policy should identify where or how the documents are maintained. Frequently businesses maintain documents in paper files, as blueprints and in electronic formats on various computers used by the company. The document retention policy should, at the very least, identify whether the documents are maintained on paper or in an electronic format.
Finally, the document retention policy should identify how long the particular category or type of document is maintained and where it will be maintained. For example, a company might keep records of its board actions as part of its corporate minute books but might decide to maintain its financial records in an electronic format as part of its accounting software system.
Ultimately, it is important to maintain a document retention policy so that the business is protected from litigation. It is important that the business maintain the records it needs to prove that it complied with contracts or made safe products. A document retention policy, that is property implemented, can go a long way to ensure that a business can find the documents that are needed to protect itself from claims that it did something wrong.
We are here to help
The attorneys at Penzien & McBride are available to review your situation and make recommendations regarding your legal situation or challenge. Our firm practices throughout the State of Michigan but especially in the Macomb, St. Clair and Oakland County areas. The attorneys can be reached at (586) 690-4400 or by completing our contact us form.