May 31st, 2022 in Business Law and Business Planning
Most back-office staff, firm accountants, and firm administrators complain that they do not have enough time to Keep Business Records Current or do monthly reconciliations and enter all transactions. And this often results in inaccurate billing, failure to meet critical deadlines, higher risks of fraud, and erroneous information for decision making.
Businesses operate in increasingly complex environments and knowing how to keep insurance and business records current is key. A Raleigh legal planning attorney can ensure that your business does everything in compliance with the law.
What Are the Benefits of Having Current Records?
Waiting until your taxes are due to start updating your business records is a bad idea because it is easy to miss out on important details that would help you save on tax expenses. Many other benefits trickle from proper record keeping.
They include:
- The ability to monitor the business’ progress and know where changes need to be made
- Avoiding underpayment or underpayment of taxes
- Manage all the expenses you claim to ensure that you pay the right amount of tax
- Better planning for meeting financial obligations, such as paying creditors and salaries
- Saves on the time required to prepare your accounts at the end of a financial year
- Helps you determine the kind of taxes your business will need to pay
- Makes filing of taxes efficient and easy
It is never too late to begin updating your records in preparation for the next financial year. And while at it, remember to consult with a corporate business attorney in Raleigh, NC, on the legal aspects of planning, and they will guide you on what is best for your business.
Which Business Records Need to be Up-to-Date?
Tax planning is key in helping businesses keep their incomes high and their tax obligations low. However, this might be impossible if the documentation needed to support the filing process are not current. Also, knowing the kind of business records is important, and they include:
- Properties owned by the business, their purchase dates, purchase price, cost of any improvements made, and deductions for depreciation
- Gift, entertainment, transportation, and travel expenses
- Inventory records
- Purchases and expenses transactions such as records of checks, sales slips, account statements, and paid invoices
- Sources of income and gross receipts such as credit card charge slips, bank deposit slips, cash register tapes, and invoices
- Health insurance information
For How Long Should I Keep My Up-to-Date Records for Tax Planning?
Most business owners wonder how long they need to keep their business records. As long as those records are necessary for fulfilling the tax code requirements, you need to keep them. The length differs depending on the type of record, for instance:
- At least six years, for income tax records
- Until the statute of limitations lapses, for any property or asset disposed off
- Three years, for taxes owed
- Seven years, for employee records
To be on the compliant side of the tax law, a Raleigh business & corporate business attorney can help you develop a specific records retention policy.
How Does Good Record-Keeping Help with Legal Compliance?
It is easy to miss out on legal compliance if the respective documents are not in order. Every business gets to sign a lot of contracts in their business operations – for purchases, leases, financing, sales, and service delivery.
You may have to refer back to these documents more often than you expect, and if you kept them well, it would be much easier. For instance, you might need to refer to your contractual obligations to ensure that you are not in breach. And in case of changes to the original B2B agreement, make sure that you update and keep the signed documents.
The same applies to business licenses such as:
- State licensure for professionals
- Food preparation permit
- Home occupation use permit
- Seller’s permit
- Doing business as (DBA) statement
- City business permits
- Proof of insurance for contractors
From time to time, you might be asked to show these documents. Failure to find the current permits and proof of insurance can put you on the wrong side with law enforcers, and you might have to deal with penalties, fines, and other legal consequences.
What Payroll and Personnel Legal Information Should I Keep?
Businesses have to deal with numerous federal, state, and local legal requirements when they hire employees. Hiring through an employment agency or hiring independent contractors would be ideal if you are still developing your accounting and record-keeping capacities.
Otherwise, you could need a payroll service to keep up-to-date records of:
- Annual performance evaluations
- Employment records
- Injury reports
- Data required by the Fair Labor Standards Act
- Income tax withholdings
- Total wages paid each pay period
- Deductions from and additions to wages
- Total hours worked
- Social Security Numbers
- The basis on which wages are paid
- Hiring and evaluation documentation
A Raleigh corporate business attorney can help you plan and ensure that you meet all your legal obligations.
Where Should I Store My Current Records?
You might do all it takes to keep your records current, but if you don’t store the information appropriately, you can lose it and be as good as someone that waits for the tax season to make updates.
- Paper-based. This system is excellent, especially when starting out. One can use an accordion folder, cabinet storage, hanging folder, and file folders.
- “Tickler” System. It is a system that reminds you of upcoming events such as, call-backs, upcoming bills, insurance reviews and renewals, license renewals, and quarterly taxes.
- Computer Systems. Computer records take less physical space and can be transferred via the internet as well. Remember to do daily back-ups and store them remotely.
- Cloud Computing. This allows you to store, manage, and process data online. The data will be secure in case your computer crashes, or you lose the physical files.
Attorneys Offering Legal Planning for the Road Ahead
Proper record keeping is a journey, but we are here to make sure that you do not make mistakes that come with legal consequences. Work with business attorneys in Raleigh who can get you prepared for anything.
At NC Planning, our top priority is to help your business remain profitable and compliant. Call us today at (919) 568-3681 for proactive and invaluable legal services for your business.
