Just because you’re operating a business out of a home office do not think you can be careless about retaining business records. In this increasingly litigious society, anyone can be sued by anyone for any reason. Learn what business records to keep and how long to keep them.
Document Retention in an Electronic Age
There is a whole new ball game in the field of records retention since the 2001 Second U.S. Circuit Court decision in Residential Funding Corp. v. DeGeorge Financial Corp. (306 F. 3d 99). The case at the circuit court level was an appeal from a trial finding against a DeGeorge Financial motion Corp. for sanctions against Residential Funding Corp. for not providing some emails in time for the trial. The Circuit Court held that even if such emails did not support the case, the motion should not have been denied on that basis. The case was sent back for a renewed hearing on discovery. This case involved a $96.4 million jury verdict. In 2006 Morgan Stanley & Co. had to pay a $15 million fine for not providing emails requested as part of a case. However, these rulings said nothing about the size of a verdict or company and create precedent for future cases. Presumably even small business operators, even in home office situations, might encounter similar legal issues.
Watch That Delete Key!
It is no longer considered advisable to simply delete email that might possible cause a later concern. This was clear in the headline-making cases dealing with email retention at Enron, Arthur Andersen and Merrill Lynch. Of course, no one thinks it is cost effective to save all electronic data, even with the best intentions. Also, a lot of email exchanges consist of repetitious data in that people repeat the content from previous threads. Eventually electronic storage needs could grow beyond any reason. Therefore, what should be kept, not only in electronic format but paper as well and for how long a period of time is important.
Retaining Problem Emails
A lot will depend on the nature of your business. For example, if there are any employees, then any email that might at some point raise questions of the business running afoul of racial or sexual problems should be kept. Any PDFs or graphics files created for customers should be saved in backup. Taking just a bit of thought and writing out your own email retention policy is a good step. It does not have to be complex because most home businesses will not generate the extensive email files the way large companies do.