Liquidating business assets is a consequential turn of events. If you’re opting to pursue this opportunity for any number of reasons, you may understandably be stressed about the prospect and the process.
Whether you’re closing your business due to retirement, restructuring or financial hardship, preparing to liquidate your assets requires a clear plan and a solid understanding of your obligations.
Taking stock before you start
The first step you’ll want to take when preparing to liquidate your business assets is to take stock of what you own. This includes physical items like equipment, vehicles, office furniture and inventory, as well as intangible assets like intellectual property, client lists and business licenses. Accurate records of these assets, along with recent appraisals or valuations, can help you determine their current worth and prepare for potential sales.
Next, you’ll want to identify any legal or financial obligations tied to these assets. For example, if equipment is under a lease or vehicles are secured by loans, those agreements will need to be reviewed. You may not be able to sell certain items without first paying off the debt or getting approval from the lender. Failing to address these obligations can lead to legal complications or delays in the liquidation process.
If your business is in debt to creditors, liquidation proceeds may need to be applied to outstanding debts. In many cases, there is a legal priority for how creditors are paid. Secured creditors are typically paid first, followed by unsecured creditors and then equity holders if anything remains.
The next steps in the process
You will also need to determine the best method of selling your assets. This might include auctions, private sales, brokered deals or even online marketplaces. The goal is to recover as much value as possible while minimizing costs and delays. In some cases, selling a business as a whole—including its assets and goodwill—may be more advantageous than piecemeal liquidation.
Finally, once the assets are liquidated and debts are addressed, you’ll need to formally dissolve the business with your state’s business registration agency. This step involves filing final tax returns, canceling licenses and permits and notifying any remaining stakeholders.
Preparing to liquidate your business assets is a truly significant transition. Regardless of what your circumstances happen to be, know that you don’t have to manage it alone. Seeking legal guidance and support is always an option.