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TexLaw
TexLaw, Attorney
Category: Business Law
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Experience:  Internationational Commercial Attorney
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I dissolved my company in Dec 2012. How long am I required

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I dissolved my company in Dec 2012. How long am I required by the State of California to keep Corporate paperwork?
Articles of Corp., Minutes, Taxes, Documents, Invoices, Banking Info., Dissolution Paperwork. Basically any and all paperwork in regards XXXXX XXXXX corporation. Please give timeline for described paperwork. Thank you in advance
Hi,

Thank you for your question.

California law imposes liability on dissolved corporations for up to 4 years after the dissolution for any sort of liability arising prior to dissolution (or in connection with the wind up).

US Tax law requires that corporate tax records be kept for a period of up to 7 years (or indefinitely if you did not file a return).

Thus, best practices would to keep all documents for 4 years. At the 4 year period, you may destroy all documents which do no not support any of the deductions or expenses accounted for in the corporate tax returns.

Please let me know if you have any further questions. Please also kindly consider rating my answer positively so that I am compensated by the website for my work on your question. Rating positively does not cause an additional charge and does not prevent us from further discussing your questions.

Best Regards,
ZDN
Customer: replied 3 years ago.

Thanks for the answer. So, I'm required to keep all of the paperwork I described in my question? Not just taxes. Correct?

Yes, for four years. Then after that, only the tax documents and the documentation which supports the deductions and expenses in case of an audit.
Customer: replied 3 years ago.

What should I do if my business partners wife, our bookkeeper, purged all documents out of spite. Destroying everything except for the taxes? What kind of problems does this action propose? What course of action needs to take place?

Are the lost documents actually at issue for any court proceeding or is there a significant chance that they will be placed at issue in a court proceeding during the next four years?

Also, is data retrieval possible?
Customer: replied 3 years ago.

No. But, as you well know, anything is possible in this day and age. I would never want "us" to get caught unprepared. It does concern me a bit that they did this without asking or talking to me first. How hard should this issue be pressed? If it gets uncomfortable, is legal consultation needed? Or, is not as big a deal as I think it is?

I agree that anything is possible.

The main concern of course is any documentation which the IRS may need in case of an audit. If it were found that these documents were destroyed, this would result in a loss of the deductions and also a penalty.

If we imagine the corporation were sued now and a missing document that she destroyed became at issue in the litigation, she would face questioning and the company could face negative consequences as a result (in the form of a negative presumption of evidence in the case).

In either case, you could sue her personally for negligence to recoup any losses that she proximately caused by negligently destroying the corporate documents.

At this point, there is not anything you can do until it actually causes a monetary loss.

Customer: replied 3 years ago.

Understood. So, I should make this an issue and press them?! How should I "make" them retrieve this info?

Sorry for the delay in response.

In the end, it's not big deal until a third party takes an action against you which would require the documents. But by that time, its late in the game. So, it is a good idea to start pressing them.

I would send out a letter telling them that they need to reproduce the lost documents as the corporation is legally required to keep them and that they are exposing themselves to personal liability for not doing so.

This will give you cover in any future litigation if the issue comes up. It also shows that the corporation is being reasonable and could potentially act as a defense to an argument about destruction of evidence (if that came up in private litigation).



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