Physical copies are a different story. Almost nobody expects physical copies to exist any more since emails and computers have been the norm for a few decades now. Note - if you did run a business purely by phone and on paper, you could get around much of this. But it would have to quite literally be 100% offline. Of course, failure to have physical copies at that point pretty much tanks your case. It's why a lot of companies that are still paper-based have sometimes decades of files in storage. Just in case.
Electronic copies are to be kept for whatever is required by law. Any gaps are considered to be essentially willfully done or done via negligence by the courts. If there's say, a fire, then it's more of a gray area, of course. A lot of companies aren't remotely in compliance with data retention laws, unfortunately, and get an earful (or more) when they get in front of a judge. Some just settle as well because the second that they look into the laws and realize that they never did anything correctly, it's better than get reamed in court.
It used to be a lot more lax, but in the last decade, the laws have gotten almost a bit crazy.
Obviously the rules differ by industry as well as for data type. Also, by jurisdiction (with, for instance, California and New York being among the most strict about it) Government projects, defense contractors, and so on have a lot more leeway. But 98% of the time, we're talking about email and database records that mysteriously go missing (which is all the courts really seem to actually care about unless it's relevant to the case itself, like a specific patent or piece of code). The general consensus is that you keep email backups forever. Some mid-size companies even have a dedicated person in IT who manages all of this and knows the laws regarding this.
http://www.dredlaw.com/2009/07/new-e-discovery-rules-in-california.html
As I said, it's gotten a bit crazy as of late.
http://nextpoint.wordpress.com/2012/08/08/learn-how-to-avoid-a-case-killer/
Improper data retention was a major factor in the Samsung vs Apple case, in fact. And this same messup will likely crush them in their counter-suit since the judge will likely tell the jury to assume the worst concerning Samsung since they pretty much destroyed documents on purpose.