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Using SharePoint 2010 I want to be able to version my PDF files. So for example I want the user to be able to check out a PDF file, update it, and check the same file back into SharePoint. Is there a simple way to tell SharePoint that PDF's are versionable or does it require a third party option?

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Simply turn on versioning for the Document Library. It will retain the different versions of the PDF file. SharePoint doesn't care what type of file it is when it comes to keeping file versions.

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Yes, because SharePoint doesn't store file difference but the entire file as a version. – Janis Veinbergs Sep 12 '11 at 8:05
@John thanks, I'm going to have to go back to the behaviour I was seeing. This relates to pdf's with digital signatures and after checking out the pdf and signing it SharePoint wanted to create a new item rather than allow the updated pdf to be checked back in. – David Clarke Sep 16 '11 at 0:16
It should allow you to save as over top of itself after signing it. We use this all the time for change management forms. – John Chapman Sep 16 '11 at 1:12

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