When you start up a business, you need to have solid strategies in place to ensure that your business runs smoothly and is successful. In the event of any kind of failure, then you would need to seriously consider liquidating your business. It is really the last resort in any business, where you are able to ensure all liabilities are paid for and everything settled before you close shop.
So what exactly does liquidating a business mean?
In simple English, it means a strategy made for exiting gracefully. Liquidation is only considered when a business goes bankrupt or sustains huge losses. At this point, everything that belongs to the company is sold off and the money received divided amongst creditors and others to ensure all debts are settled. This repayment happens based on a priority system. Assets that are sold during liquidation also include real estate, machinery, equipment, etc.
What considerations do you make when liquidating a business?
The decision to liquidate a business cannot be made overnight. The entire management team needs to think it through and formulate a plan. Liquidation is only decided upon when the owners of the company decide to shut down the business. Once all assets are sold and the debts settled, if there is any money remaining, it is then divided amongst the owners and shareholders. The liquidation of a company takes on two forms: compulsory and voluntary. Compulsory liquidation is determined by legal bodies.
How does the process work?
First legal and financial advice must be sought. Based on these recommendations a liquidation plan is formulated by the owners, management team, shareholders and investors. An appraiser is also brought into to assist with the liquidation process. The assets are then all accessed, the necessary paperwork drawn up and the appraiser then sets values for the assets owned by the company. Once the assets are sold off, based on a list of debts, creditors are paid off.