How Long (and Why) You Must Keep Every Business Record 🇨🇦
Every business, from the corner store to the tech giant, needs to keep accurate and reliable records. This isn't just about staying organized; it's about complying with the law, managing your finances, and protecting yourself from audits. But with so many rules and regulations, it can be tough to know what to keep and for how long.
The Basics: Who and What
In Canada, the vast majority of businesses are required to keep records. This includes:
Individuals (sole proprietors, partners, etc.) who must pay or collect taxes
Businesses of all sizes, from corporations to registered charities
Political parties and candidates
The types of records you need to keep will vary depending on your business, but generally speaking, you'll need to keep track of:
Your income and expenses
Assets and liabilities
Payroll and employee records
Contracts and agreements
Bank statements and receipts
The Numbers Game: How Long to Keep It All
The good news is that you don't have to keep everything forever. Most records can be destroyed after a certain period of time. Here's a general guideline:
Tax records: Keep for at least six years after the filing deadline. This includes your tax returns, supporting documents (receipts, invoices, etc.), and financial statements.
Business records: Keep for at least six years after the end of the fiscal year to which they relate. This includes your general ledger, accounts payable and receivable records, and payroll records.
Capital purchases and investments: Keep for at least six years after the year you dispose of the asset. This is because you'll need the records to calculate your capital gain or loss.
Corporate records: Keep for at least two years after the corporation is dissolved. This includes minutes of meetings, share ownership records, and financial statements.
Beyond the Basics: Special Considerations
There are a few special cases to keep in mind:
Carried-forward amounts: If you carry forward a deduction or credit on your tax return, you need to keep the supporting documents for that amount for at least six years after the year you finally claim it.
Audits: If you're ever audited, you'll need to be able to provide the CRA with all of your relevant records. So, it's a good idea to keep your records in a safe and organized place.
Register of individuals with significant control (RISC): If you're a private corporation, you need to keep a register of individuals who have significant control over your company. This is a new requirement as of December 2018.
Keeping it Digital
In today's digital age, there's no need to keep all of your records in paper form. You can scan your documents and store them electronically. Just make sure you have a secure backup system in place in case of hardware failures or cyberattacks.
The Bottom Line
Keeping accurate and up-to-date records is essential for any business. By following the guidelines in this article, you can make sure you're complying with the law and protecting yourself from financial and legal risks.
Canada Revenue Agency: https://www.canada.ca/en/services/taxes.html
The Canadian Institute of Chartered Accountants: https://www.cpacanada.ca/become-a-cpa
I hope this article has been helpful. If you have any questions, please feel free to leave a comment below.
Disclaimer: This article is for informational purposes only and should not be construed as tax or legal advice. Please consult with a professional advisor for specific guidance.