What You Should Know About Company Liquidation

Company Liquidation is the process in which the company assets are sold and the company ceases to operate. It involves winding up all the financial matters.

This is the last resort for the company when no other option is left. This is the exit strategy for the business. For a struggling business, this can be a great way.  

Why Does a Business Liquidate?

There can be many reasons for a business to liquidate. Some of the major reasons are – 

How to Liquidate a Business?

1. Identify why to liquidate – The first thing while liquidating a company is to identify why you are liquidating the business. It will ensure that you are taking the right decision. Liquidation is generally done because a business fails due to the absence of profit and increasing debts. 
2. Make a plan to liquidate – A liquidation plan means to dispose of a considerable part of the assets out of the usual course of business. The plan should cover all the parts of the process. The plan will help in reducing anxiety and stress. By proper planning, one can make the process smooth.
3. Contact entities that can help in the liquidation – One has to contact different professionals before the process starts. The professionals can be accountants, lawyers, brokers, etc. Accountants can help in determining which assets can be sold and lawyers can help with the paperwork that needs to be done. At last, we can also contact the clients and the competitors, they can also be interested in purchasing the assets.  
4. Pay the necessary taxes – Everyone has to pay the necessary taxes while liquidating their assets. The taxes can be capital gains tax, business tax, or investment income. Paying taxes ensures that they are under the rules and regulations of the law. 
5. Winding down of the business – The last step in liquidation is to wind down the business. The process can be complex. There are different types of businesses like the partnership firm and the sole proprietorship business. In this, there is a need to distribute the profit to the stakeholders. 

By following these steps, it is feasible to wind down the business. 

Conclusion

Company Liquidation does not seem like a good thing at first. But for certain businesses, this can be a good option. It can open new doors for the business.