If your business simply can’t pay its debts, or you have simply decided to dissolve the company, you must undergo the process of liquidating. Liquidation involves selling any assets your business owns in order to pay stakeholders or shareholders back debts that you may owe them but can no longer pay. Unfortunately, you are forced to shut your business down for good. There are a variety of different types of liquidation, which can happen to both small businesses and large, public companies or private businesses. Liquidating your business can be a tough process to go through, so it’s always best to work with a liquidation company.
Different Types of Liquidation
As mentioned previously, there is more than one form of liquidation—there are 3 types, in fact. Each type of liquidation serves a different purpose, but at the end of the day the point is to rid the business of all of its assets.
Compulsory Liquidation is one of the forms of liquidation. This is a process that happens when creditors or even lenders will petition to liquidate a business if their debts are not paid within a certain period of time. This type of liquidation is involuntary and is done when a business has failed to pay back their debts in a timely manner.
Members’ Voluntary Liquidation is saved for companies who don’t have any debt, but the business owner wants to exit the company. As a result, they must volunteer to have their business liquidated. In order for this to happen however, three fourths of the company must agree to liquidate it. Once a decision has been made, a liquidator is hired to help settle any debts or legal disputes that the company may have.
Creditors’ Voluntary Liquidation on the other hand, is when a company’s owners have come to the realisation that they won’t be able to pay their debts on time, or if their liabilities exceed the asset value. This can be a court ordered process that business owners are obliged to cooperate with in order to pay back their debts.
The Aftermath of Liquidation
Unfortunately, a business does not have the opportunity to start over after it has been liquidated. In a bankruptcy case for instance, a company has the chance to rebuild their business and start from scratch. But when a business has been liquidated, it has to be dissolved entirely, with no chance of it ever coming back.
What Stuff Gets Liquidated?
Just about everything your business owns gets sold in order to pay back debts. This includes everything from remaining inventory, office furniture, office supplies, tools, and more. Anything that can be sold for cash will be liquidated and the money made goes to pay the creditors.
Liquidating Your Business
You can choose to liquidate your own business, or you can hire a company that specialises in liquidations to do it for you. If you choose to do it on your own, however, there are a few things you should know first.
For one, you are going to want to start out by making a list of any physical property that your business owns along with any debts that are owed. Debts can include everything from rent, a security deposit, and unpaid bills.
When making a list of the physical property your business owns, don’t forget to include things like cash registers, art, office furniture, and even leftover office supplies. All of these items can be sold to help pay off your debts.
After making a list of physical property, you will also want to include anything else of value which can include a contract with a supplier, your lease, any contracts you may have with customers, and any accounts you may have left.
The next thing to do would be to find buyers for your items. Be sure to use the internet to your advantage and post items for sale on different websites and social media platforms. Be sure to try and get as good a price as possible for your items in order to get as much as your debt paid off to the creditors who are owed.
Be sure that after selling an item you make note of it and include details like who you sold it to and how—whether via an ad on the internet or at an auction. This is important information to keep because you never know whether or not creditors will want proof of the liquidation of your assets and so that you are able to file a correct tax return.
If you find that liquidating your own assets is too overwhelming or you simply don’t have time to do it yourself, you can always hire a company that specialises in liquidating businesses to help. Liquidators can also buy all of the product in bulk and even resell it.
Hiring the Right Liquidation Company
When hiring a liquidation company, there are a lot of things to consider. The first thing you want to prioritise is experience. The last thing you want to do is work with a company that has no idea what they are doing. Look for a company that has a track record of successfully closing businesses and who have plenty of experience doing so.
Another thing to consider is a company that will be able to offer you a fair contract. Be sure to read through the fine print when considering a liquidation company to make sure that you aren’t being taken advantage of in any way. Be wary of any companies that make promises that sound too good to be true as chances are, they probably are.
Opt to work with companies that offer a flat fee instead of a percentage as this will make it easier for you to plan for the future and you’ll know exactly how much you are making from the liquidation.