Old invoices, bounced checks and such

Auto glass business owners and their companies have legal issues that go beyond short payments and steering. In this edition of my column, I’ll answer general legal questions. From time to time, I’ll answer readers’ questions. If you have a question of general interest, send it to me, and you may see it in a future column.
It’s always a good idea to maintain a relationship with professionals who know your business, such as attorneys, accountants and insurance brokers. They can give you specific advice on how to approach your unique challenges.

Q: I’ve got boxes of invoices that we have issued over the life of our business. How long do I need to hang on to them?
There are no hard and fast rules for the length of time you should keep documents. However, if you have short-paid invoices, you should keep those dating back at least as far as your state’s statute of limitations. There might be some evidentiary benefit to keeping invoices a few years beyond that as well, particularly if the insurer was paying you in full before you received a short payment.
You should also keep invoices dating as far back as your tax professional recommends for tax documentation purposes. My accountant recently told me I should hold on to my invoices for seven years.
You can discard older invoices, but be careful how you do so to protect your customers’ private data, including credit card numbers.
Q: My customer’s deductible check bounced. Is there an efficient way to collect the money I owe?
In virtually every state, the answer is yes. The best way to do so is to take the customer to small claims court. First, contact the customer and try to collect the money directly. If that fails, start an action in small claims court.
Small claims courts are designed to address these kinds of disputes. Typically, the filing fees are low and the procedures are loose. Information and instructions on how to use small claims courts are available online. Most court personnel associated with small claims courts are helpful and accustomed to answering even basic questions about how the system works. Small claims courts are designed to be user friendly.
In the case of a bounced check, it’s not likely the customer will have a defense. Most of the time, he or she will not show up and you will get a default judgment. At that point, you will need to follow your state’s rules for collecting on a small-claims court judgment. A description of that process should be on the court’s Web site, or court staff can tell you the next step to take.
Some companies have tried to use small claims court to chase short pays. Be aware that in many states, you cannot dispute assigned claims in small claims court. In a direct claim you attempt to collect a deductible through small claims court. An assigned claim is an attempt to collect a short pay.
Q: I incorporated my business. Is there anything else I need to do to protect my corporate status?
There are a couple of things you should do to protect your corporate status. First, many states require incorporated businesses submit periodic filings. Information on what you need to file and when should be on your state’s Web site.
Second, you need to act like a corporation. That means you must open a separate bank account for your business. Do not co-mingle your personal funds with those of the business.
You also need to hold at least one annual shareholders meeting and document that meeting. State statutes govern what type of documentation is required. Some states might also require documentation of board of directors’ meetings.
You should keep these important records in a specific corporate record book, along with your articles of incorporation and bylaws. It’s a great idea to have an attorney review your corporate books and records to make sure they are current. If you don’t treat your company like a corporation, you could find yourself stripped of the protections that incorporation provides you.