It can be challenging to figure out how long you should hold your documents. In our previous post (link to the post entitled: How Long Should You Keep Your Business Documents), we discussed documents you are legally required to hold for a sustained period. So, in this article, we will talk about documents that you are not required to keep legally.
Leases (for real estate): If your business leases property, it must keep related agreements safe until all future payments are made, and obligations have been fulfilled, at which point they can usually be disposed of. However, some rental deals may require you to keep the documents past the expiry date. This largely depends on how much money has changed hands or what information was written in these documents. For example, a contract with an appliance supplier might dictate that both parties will hold each other harmless from any legal action involving the transactions done under their terms forever, whereas one between two businesses will usually expire after seven years.
Lease contracts: Lease contracts should be kept for at least as long as they are legally valid, regardless of whether payments have been made, unless the rental agreement specifies a shorter time limit. If you sell your business and its lease does not include an option to buy in case the property owner wants to keep leasing it out, then you must secure all related legal documents. This also applies when selling all other items leased by your company, such as equipment and machinery.
Written agreements with other businesses: Most contracts that do not require keeping them indefinitely are valid until one party says they no longer want to honor the terms or both parties agree to end them. For example, a business may sign an agreement to promote its products. This deal would stop being active once either side decides they no longer want to participate or something changes significantly regarding what was promised. However, because legal language is often very complex, standard written arrangements can last longer than anticipated. This means that even if you change your mind about the terms, they may still be considered valid and binding as long as their original date has not passed.
Legal documents related to real estate: If you own a property or land of any kind, those records need to stay active until all mortgages and liens (title claims) have been fulfilled. At this point, most business owners can usually dispose of them.
Note: The only exception would be if one party fails to make payments before this date passes, then either side can request its cancellation, but both must agree unanimously with the buyer holding priority over anyone else. In such cases, anything written in these legal papers will no longer apply, and they can be disposed of.
Written agreements with suppliers: If your company signs any written deals with other businesses or individuals, these records must stay active until all related transactions are completed. Past this point, the business can shred its copies. However, keep in mind that some types of contracts may need keeping indefinitely if the supplier has taken out a lien on your property (a claim against it) and another party is involved, such as a bank or financial institution. In addition, you should secure legal documents received from outside sources and use them only when needed unless their expiration date passes; otherwise, you could violate patent laws by using proprietary information without permission. This also applies to proposals sent to you by third parties since they often contain sensitive information that can be used for commercial purposes.
Written agreements with clients: Agreements promising to provide a service (such as consulting) or products (including software and digital content) should always remain active until all related transactions have been completed. However, keep in mind that some types of contracts may need keeping indefinitely if the client has taken out an injunction against your company, preventing it from providing such services/products under any circumstances before this date passes. Otherwise, you could violate patent laws. This also applies when signing deals requiring confidentiality, so only disclose confidential details about these arrangements after its expiration unless their privacy clauses specifically state otherwise.
Written agreements with employees: If your company signs any written deals with its staff members, such as employment contracts or non-compete clauses, these records must stay active until one party says they no longer want to honor the terms or both parties agree to end them.
Business records: All other business-related documents should always remain active until either party decides they no longer want to honor their terms or both decide together to end them. For example, it is not uncommon for businesses that pay employees weekly (such as waiters and bartenders) to sign contracts requiring payment even if the work was subpar so long as the worker completed at least half of what they promised.
When it comes to shredding documents, there is no timeframe. It mostly depends on what’s in the file, if the information could be used in the future, and if you are legally required to hold the document. Remember, hoarding business documents unnecessarily makes you a prime target for identity theft. So, it’s ideal to dispose of unnecessary documents early. Just make sure you follow your state’s disposal guidelines when getting rid of sensitive documents.