The decision to liquidate your business may not have been easy, but it can be made easier with the right partners and resources. When a company goes into liquidation, its assets are sold so that the creditors are paid what they are owed. It is only after this process of selling assets that the company is considered liquidated. Whether you’re voluntarily closing your company or have been ordered to do so by a court petition, the process is standard with a few variations but the same end result.
Begin by familiarizing yourself with the various kinds of liquidations so that you’re able to plan on how to proceed. The main types of business liquidations are:
1. Solvent liquidation: Also known as Members Voluntary Liquidation (MVL), this process is straightforward and tax-efficient. If your company isn’t in debt and you wish to close the business for any reason, this liquidation may be the right fit for you.
2. Creditors’ voluntary liquidation (CVL): In the case that your business is unable to pay back the debts it owes, the shareholders may decide that liquidation is the best course of action for the creditors. After this, the company will be liquidated and the assets will be distributed to the various creditors. This is the best course of action if your company is insolvent and you wish to voluntarily acknowledge the end of the business.
3. Compulsory liquidation: This type of liquidation occurs when a creditor attempts to force your company to close to recoup the debts they are owed. This process can be more complicated because it is non-voluntary and court-mandated.
Begin by identifying what assets you’ll need to liquidate. Since your remaining business assets will need to be converted to cash to pay off your creditors, making a comprehensive list is a great place to start. This list should include any items that are the property of your business and will include two main kinds of items. The first type of item to consider for business liquidation is tangible property. This includes:
In addition to tangible property, there will be items of an intangible nature that belong to your business. These may include:
The next step in business liquidation is to find buyers to take over your assets. You can go about finding buyers through industry networks or contacting suppliers and competitors who may be interested in your assets. Tangible items like furniture or equipment can be listed on platforms like Kijiji or eBay.
However, listing each individual item and coordinating with buyers can be a time-consuming process. If you have a lot of items, perhaps even bulk numbers of some of the items, a liquidation auction may be a great solution for your business. You’ll be able to sell your items all at once, or through bundle deals – but most importantly, you’ll be in control of the process. Professional liquidation experts are a great resource to guide you through the auction process and can make the whole process run smoothly and efficiently.
Often for intangible items such as intellectual property, as well as customer lists and product names, it might be competing businesses that are interested. Works or jobs in progress may also be of value to competitors, thus making an asset sale that much easier.
An important step to consider during this stage is to record all transactions. For business liquidations, it is important to record how you tried to sell each asset (proof of this would be copies of ads or listings), the final buyer and the total amount received. Keeping detailed records of your assets will help you in the future – for example, in case you file for bankruptcy or one of your claims is questioned by a creditor. This information also needs to be filed for your tax returns, so go through this process carefully.
When it comes to secured and leased assets, as well as prepaid insurance premiums, you will want to make sure you are working with scrutiny. For example, any assets that you pledged as collateral for a loan cannot be sold without the permission of the creditor. Therefore, you’ll need to speak to the creditor and figure out how to proceed with secured assets.
Leased property, on the other hand, belongs to the lessor and not you. Your options here would be to return the property or ‘assign’ the lease contract to someone else.
For insurance premiums, such as workers’ compensation premiums and liability insurance premiums, you’ll want to request refunds if possible. This depends on the terms of your policy, so make sure to double-check the extent of your refunds.
Lastly, reach out to professionals if you need help liquidating your company’s assets! In addition to the stress of liquidation, many business owners don’t have the desire or skill to sell off their own assets. It is better to assign your debts to a company that specializes in liquidation businesses. Our team has years of experience in this field and can help you close up your business with ease.
If you would like to know more about business liquidations, call Michaels Global Trading today at 888-471-5066 or contact us here.