Documenting your business dealings helps you make sure you are always covered, but once you put something in writing, the next logical determination is how long to save that document.

Business owners regularly tell me they keep records for seven years because it is “the law.” The magic seven-year rule may be a tax guideline, but it is a business and legal myth.

Prior to going Enron on your corporate records, take a look at the IRS’s Starting a Business and Keeping Records. The Record-keeping section addresses records for taxes. To address concern about potential lawsuits, work with your attorney to design a record retention plan. Be sure the plan covers paper records and electronic data. Once you have a record retention (and destruction) plan, integrate that plan into your business processes.

What if you don’t follow the plan?

Under Iowa law [Iowa Civil Jury Instructions contain a model instruction] if a jury concludes you intentionally destroyed or failed to produce evidence, it can assume that evidence would have been unfavorable to you. The jury may see the missing evidence as the “smoking gun.” A saved receipt may nail your case down; a prematurely destroyed receipt may become a nail in the coffin. Well kept records may be more productive than winning lawsuits; they may convince opposing parties not to sue you in the first place.

How do you devise and regularly apply a sound plan to avoid problems?

In Iowa, most oral contracts have a five-year statute of limitations [section 614.1] to enforce a contract (or to be sued for a breach). Depending on your business, you may wish to retain supporting documents for five years after the contract ends.

In Iowa, most written contracts have a 10-year statute of limitations [section 614.1]. Does your record retention plan keep the contract for 10 years after performance of the contract ends? How long do you keep record of payments made or received? Should you keep emails about the contract?

Under Iowa law, as a designer, manufacturer, distributor or seller of a product, can you be sued 10 or 20 years after production and multiple re-sales if the product causes damage? What are the time limits or Statutes of Repose [614.1(2A)] for such claims? What if your product is a Web-based application? How long must you keep the records of product testing? Of use? Was your product sold with warnings or safety devices, or for a Web-based application, was a warning included with installation or initialization? Do you have records that show your product was altered?

Although the questions are complex, setting consistent policy will make later involvement in litigation less likely or, at least, less painful.