One of the key decisions in sorting through the ever-growing mass of paper in your office is what to keep and what to shred. According to Paula Goedert, the National Association of the Remodeling Industry’s  general counsel, the most important documents to keep are those that back up the numbers on your company’s tax returns, adding that the rule of thumb is that those can be ditched after seven years. “After that there would have to be criminal activity for the IRS to be reviewing a return,” she says.

There are some documents that should never be thrown away — articles of incorporation, licenses, permits, etc. (see below) — but many documents expire over time, so you should make sure they have no legal significance before shredding.

The biggest mistake small businesses make in document retention is a lack of organization. “It is so easy to subpoena documents to start a lawsuit,” Goedert explains. “Courts take the obligation to turn over all subpoenaed documents very seriously. You can’t just shuffle through a few shoeboxes and then sign an affidavit saying you’ve turned over all relevant documents.”

There’s also the matter of job files. Attorney Richard Feeley, president of Feeley Mediation & Business Law, in Marietta, Ga., says the typical statute of limitations for a breach of contract claim is six to eight years. For property damage claims, including property damage caused by defective workmanship, the statute is typically two to four years after the damage has been discovered.

“With today’s technology, the savvy remodeler should be moving toward a paperless office  and electronically storing basic job files (contracts, change orders, materials lists),” Feeley says. “I would suggest that the remodeler partner with his business attorney to determine state statutes of limitations and set up a process to maintain files for at least those limitations periods.”

Mark A. Newman, senior editor, REMODELING.

This is a longer version of an article that appeared in the February 2012 issue of REMODELING.