The decision to exit a business is never easy, as most business owners have invested considerable time, money and sweat equity into trying to make their operation successful. However, the reality is that sometimes things just don’t work out, or the business owner simply can’t do it anymore.
If any good news can come from this, it’s that there are a host of options available to those looking to exit a business, including passing it on to the next generation, merging it with another operation or simply selling it outright. If none of these are an option, the business owner also has the option of liquidating assets.
At the outset
Experts indicate that it’s imperative for any business owner considering the liquidation of assets to strongly consider speaking with a skilled legal professional and/or accountant prior to initiating this complex undertaking.
Indeed, these professionals will not only provide invaluable guidance on tax planning strategies, but also help develop a plan to present to creditors and help secure their permission to proceed.
First step: Making an inventory
Once the necessary consultations are conducted and the decision to proceed is made, experts indicate that the first step in the liquidation process is taking stock of assets.
First and foremost, they advise business owners to create an inventory of assets containing everything from pictures and descriptions to serial numbers. This step, they argue, will not only serve to keep things organized, but also provide a degree of protection should creditors or the Internal Revenue Service start seeking answers.
As for what assets shouldn’t be earmarked for sale, these include any inventory, furniture or equipment that is no longer current or worn down from constant use. In fact, these types of items can often be donated to charity, resulting in a potentially valuable tax deduction for a business owner.
We’ll continue this discussion in a future post, exploring what business owners can do to prepare for a liquidation sale.
Whether you are a business owner with questions about this issue or a lender seeking to protect your investment, consider speaking with a skilled legal professional who can protect your financial interests as soon as possible.