You have all likely heard of Marie Kondo and her incredible ability to organize and declutter a space. However, when it comes to the welfare of your business, sometimes holding onto more is better. The documents for your business tell a story and you must keep them collected and organized like an invaluable manuscript. Here are a few tips for organization and plan document retention:
Never rely on a third-party administrator or record keeper to keep track of or maintain your plan documents: We see so many situations in which these types of documents and amendments were sent to a client for execution, but the documents went unsigned. Maintenance and organization of executed plan records must be maintained.
Auditors and the IRS care about who signed the documents: In most situations, it is important to keep a trail of documents that are signed starting with the original plan, all of the amendments, reinstatements of the original plan, subsequent restatement amendments, and more. Failure to keep signed copies of the documents can create doubts as to whether you have been following the terms of these documents correctly.
Do not use off-the-shelf or pre-approved documents: Many companies make the mistake of using adoption agreements and basic plan documents that leave them open to issues. If you reinstate or amend a term of your business, you need to be sure to create and file the appropriate documentation. If you are not sure whether you are matching the correct original document with the matching adoption documents, an experienced business planning attorney should be able to help you understand how you need to handle all the appropriate documents for your business.
Keep copies of all resolutions: If your board authorizes the adoption or amendment of part of your plan, establishes a new policy, changes a fiduciary committee appointment, or changes or creates a new rate of contribution designation you need to keep copies of all the documents that go along with these changes.
Keep signed copies of all agreements: You should keep all copies of plan service agreements as well as all subsequent changes.
Keep copies in chronological order where applicable: Plan summaries, updates, and significant participant notes should be kept and maintained in the order that they were created.
What does keep really mean? The answer is simple. Keep these documents forever. Why you ask? Some types of issues, such as tax issues, litigation, and more can go back to the initial inception of the business plan even if it is decades old. If you do not have your documents in order, you are at a huge disadvantage to the claimant because you will not have adequate information to defend a claim and prove your side.
Contact an Experienced Business Planning Attorney Today
If you have questions about forming, maintaining, or running your business, including creating and retaining documents, contact the attorneys at Verhagen Bennet LLP today. We have years of experience helping a variety of California businesses operate their business and can help you too. Contact us today to schedule a consultation.
© 2019 Verhagen Bennett LLP — This article is for general information only. The information presented should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.