If you are faced with closing your business and you were unable to locate a buyer to purchase the business in its entirety, you should consider selling/liquidating your business’s assets. There are variety of reasons to close a business, including poor results, owner retirement or poor health, or the loss of a franchise arrangement. Closing a business and liquidating assets can be a very complicated procedure subject to many laws and regulations.
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You should speak with an attorney or certified public accountant that specializes in business closures.
While the process of closing a business is very difficult for many reasons, it is important to make sure you get the best value for your assets, pay your employees, satisfy your creditors, and comply with state and federal laws.
2. Talk to your lawyer and accountant.
Before taking any steps to close your business and liquidate your assets, you should speak with your lawyer and accountant and make a plan that follows federal and state law, provides you with the most value for your business, and pays off your creditors.
3. Review your business’s articles and bylaws.
You should review your business’s articles and bylaws to make sure that your closing plan is in accordance with your business partnership agreements and meets any shareholder requirements.
4. Document all debts owed by the business.
Gather information and documentation that states the amounts and creditors of any debts owed by the business. This may include small business loans, accounts payable, and other debt. Go through this debt and figure out if the debt is secured or unsecured (secured means backed by collateral). In addition, check if any of your loans are personally guaranteed (meaning that you are personally responsible for their repayment).
5. Hire an appraiser.
Once you have inventoried all of your assets, you should hire an experienced appraiser to value these items. Appraisers know how to reduce the price of goods for damaged assets and properly value assets, such as machinery.
6. Notify your creditors.
Remember, you must discuss your plan to liquidate your assets with your creditors. After developing a plan with your accountant and lawyer, you can present this plan to your creditors. If your plan appears reasonable and shows how you will satisfy your debt, your creditors will most likely give you permission to move forward.
7. Pay your employees.
Once you have liquidated all of your assets, you should work to satisfy your financial obligations. You should start by paying employees by their last day of work or very soon after, depending on the laws of your state.
8. Terminate ongoing contracts and refund deposits.
Locate records of services or products you have been paid for already but not completed. Return deposits to customers in full. Similarly, contact customers under ongoing contracts and settle the account according to the contract.
9. Settle your debts with your creditors.
Once you have satisfied all of your legal reporting and payroll obligations, you are responsible for paying off the debt your business owes its creditors. You may be able to negotiate a reduced repayment if it appears that you are unable to repay all of your creditors.
10. Distribute assets to owners and partners.
If you have paid off the business’s debt, you can then distribute the remaining assets to the business owners or partners in accordance with the business’s articles of incorporation or bylaws.
11. Close all business bank accounts.
After waiting a reasonable amount of time for creditors to make any last claims, you should close the remaining business accounts and distribute the funds to the owners and/or business partners.
12. Maintain your business records.
Even though your business is closed, you still have an obligation to maintain your business records for a certain amount of time. You should consider maintaining your records for at least 3 to 7 years.
