As a business owner, there will eventually come a time when you need to either sell the business or simply shut it down. This could be because you’re ready to retire, ready to start a new adventure, or because it simply isn’t profitable.
This article focuses on liquidation and if you’ve chosen to close down the business and move on, why you’ll need to liquidate your assets. By liquidating all assets, you will be able to bring in as much cash as possible to either pay your creditors, or if things go well, put some money into your pocket for whatever comes next. As with most business activities, it is important to handle the liquidation process correctly in order to comply with the laws and maximize your profits.
What Can Be Liquidated?
The first step is going to be identifying what assets your business has so you can begin selling them. Some things, like office furniture, computer equipment, and vehicles are obvious. There are many other things that your business may have, however, that you don’t want to overlook:
– Security Deposits – Make sure you get all security deposits back from any property you were renting.
– Prepaid Premiums – Request a refund on any prepaid insurance or other premiums that were made for your business.
– Inventory – If you still have any inventory of the products you sell, this should be sold off.
– Contracts – Make sure you are appropriately handling your contracts. They should either be appropriately terminated or, if possible, assigned to a third party that may value the contract. For contracts that are terminable upon notice, follow the notice procedures. If a contract has a term to it (i.e., the parties expected the relationship to continue for a specific period of time), then consider paying termination fee to terminate the obligation.
– Lease – If you have a lease that is locked in for a number of years at below current market value, consider sub-leasing it out to bring in some money. However, the devil is in the detail on these agreements on whether you can profit from the sublease. So, be sure to understand your lease terms. You may also need to discuss an early termination with the landlord to “cut your losses.”
– Fixtures & Furniture – These items should be sold.
– Art & Decorations – Art and decorations that are used in your office can be surprisingly valuable.
– Much More – Every business is different and will have different assets that can be liquidated. Make sure you consider every possibility to get the most back.
Once you have a list of all the assets you want to liquidate, you will need to find the right buyers. For some things, you can simply hold a traditional sale and buyers will come to you. This is a good option for items such as office furniture that are commonly in demand. If you have specialized technical equipment, inventory, or high-value items, however, you should aim to seek out specific industry-related buyers wherever they may be. For example, machinery can be worth hundreds of thousands of dollars, but only to a very small number of buyers. Seeking them out to make a sale is well worth the effort.
Paying Balances on Secured Assets
During the liquidation process you will need to make sure you are paying any balances due or other debts that the business has. This is especially critical if the business is closing down due to bankruptcy. Remember, you can’t sell something that has a lien on it without first paying it off. In many cases, however, you can set up an arrangement where the buyer will pay the lien first, and then take possession of the item.
Don’t Go Through Liquidation Alone
While on the surface liquidation may seem like it is just selling your assets, there is a lot more to it. Having an attorney there to assist will not only help you to handle all legal matters properly but can often help you to maximize your assets. Contact Doida Law Group to schedule a consultation to get help with the liquidation process or better understand how to go about selling your business.