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You are here: Home / broker dealer audit / 5 Types of Small Business Records You Need to Keep

5 Types of Small Business Records You Need to Keep

July 20, 2021 by probizinfo

A man and woman looking over documents on a table in an office. Broker dealer audit. Ernst Wintter & Associates LLP.
A man and woman looking over documents on a table in an office.

As a small business owner, you need to keep certain records for varying periods of time. These records are used by the IRS and other organizations as supporting documentation to validate your business. An independent auditor, such as a broker dealer audit or California nonprofit audit provider, can help you determine the best way to organize your records. 

Here are the five categories of records you need to keep:

1. Records demonstrating income

These gross receipts should show the amounts and sources of all income. Common broker dealer audit deficiencies are found with these records, due to incomplete revenue documentation. These include:

  • Cash register tapes
  • Forms 1099
  • Invoices
  • Receipt ledgers and/or books
  • Records showing deposits and withdrawals from your accounts

2. Records documenting business costs

Careful storage of your small business expenses make it easier to prove losses during tax season. These records show a description of the expense and the amount paid. These include:

  • Banking documents
    • Statements, deposit slips, or canceled checks that show the payee, the amount, and proof of payment
  • Credit card receipts and statements
  • Invoices
  • Petty cash slips
  • Store cash register receipts

3. Records documenting business purchases

If you produce your own products, the cost of materials and parts are considered purchases. These records should show the amount paid and to whom. Included are:

  • Banking documents
  • Credit card receipts and statements
  • Invoices
  • Store cash register receipts

4. Expenses for transportation, entertainment, and travel

Take advantage of tax deductions for transportation and entertainment costs associated with business. During tax season, you’ll have to explain certain aspects of the expense to prove they’re related to doing business.

5. Property that your business owns and uses

These are your business assets, and include machinery and facilities. Records for these are used to compute annual depreciation, demonstrating the loss or gain you’ll receive from selling. These documents show:

  • When and how you purchased the item
  • Purchase price
  • Improvement cost
  • How the asset is used
  • Tax deductions taken for depreciation and/or casualty losses

For selling, you need to show:

  • When and how you disposed of the item
  • Selling price
  • Costs associated with the sale
    • Advertisements, shipping, etc.

Records in this category include:

  • Banking documents
  • Invoices
  • Real estate closing statements

As for how long you should keep these records, the IRS Small Business Information page provides small business records guidelines based on your tax filing standing and IRS retention periods. But in general, you should keep records for at least seven years, which covers most regulatory, insurance, and legal requirements for small businesses.

Categories: Filed Under: broker dealer audit Tags: Tagged With: broker dealer audit, nonprofit audit

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