How does a business conduct liquidation?

Every business owner reaches one inevitable conclusion – now is the time for me to get out of the business. Maybe you are retiring and want to turn the business over to children or business partners. Maybe you plan to sell to a competitor. Maybe you are forced to declare bankruptcy.

If you don’t have an available successor or purchaser and your company is solvent enough to avoid bankruptcy, you might consider liquidation as a way for you to exit your business.

Take an inventory of your assets

When considering liquidation, it’s a good idea to take stock of what you have to sell. Creating a physical list will help you determine what kind of liquidation sale to conduct and whether a liquidation is worth the trouble. You could also include contracts, real estate or intellectual property. Getting a written appraisal can help you determine what you can sell.

Accounts receivable are much less valuable after a liquidation so you should put a lot of effort into collecting as many debts as possible or, possibly, sell the debts to a buyer.

Most businesses fall into one of these categories:

  • Assets dont produce income: These businesses – accounting firms, insurance agencies – have limited hard items to sell.
  • Assets create income: These businesses – restaurants, construction companies – have specific tools that are used to create income.
  • Assets are income: These businesses – retail such as shoe and furniture stores – sell their inventory each day to create income.

A liquidation professional can help coordinate selling the stock. The professional will advise you not only on the process, but also what time of year is best for a liquidation and how to price the stock.

There are several methods for sales, including selling straight to prospective buyers, hiring a dealer to sell on consignment, conducting a going-out-of-business sale, or selling online or via auction.

It’s also important to protect yourself from potential legal exposure from the sale of any items. Hiring a lawyer experienced in this field can help you finish the process and walk away from the business with the best possible outcome.

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