If a business that is young or essentially a startup fails or faces a state of insolvency, the owners of the business should properly liquidate the company to avoid any additional losses upon the existing losses that the business faces.
However, inexperienced startup founders and small business owners are not properly aware of how to properly close the company. If they do not liquidate the assets of the company properly then they can face legal problems in the future.
To liquidate a company properly, the owners should first prepare a company liquidation checklist which contains a list of all the assets of the company whether they are intangible in nature or are hard assets of the company. The company liquidation checklist should list all of these along with any operational costs as well as legal costs. All this would help you to prepare for a proper exit strategy for the company.
Points That Should Be In A Company Liquidation Checklist
In order to shut down a company, it requires the business owner to stop all of the activities that their business is currently involved in, they have to sell all of their business assets at a proper price as well as they have to handle the negotiations regarding the terminations of contracts of clients as well as employees of the business. The owners of the business may also have to ask the court for some kind of bankruptcy protection. However, it is indeed possible for a company to come to an end without reaching bankruptcy.
The owner can achieve that by properly selling all of the company’s assets of all forms like inventory, real estate as well as any types of equipment. You can also sell any intellectual property rights that are owned by the company to pay off the debts that the business is under.
If the owner fails to pay the debts that are owed by the company in full by liquidating the company assets, then they need to declare the company as bankrupt and pay the creditors at least part of the debt that they are owed. When we say that a company is being liquidated, it often means that the company is not able to pay off their debts to the creditors of the company.
The process of liquidating an insolvent company is very different from liquidating a solvent company. At last, when the process of liquidating is over, the owner of the company must dissolve any business entity that the company is linked with for example the corporation or a partnership.
The initial segment of a liquidation rundown ought to incorporate all of the company’s commitments be it to their creditors, their employees, their clients or any other entity that the company is obliged to.
This incorporates creditor liabilities, contracts, leases, charges and different understandings that the company has agreed upon in the past. Audit the majority of your agreements to decide your commitments in case that the company doesn’t perform their part of the agreement.
For instance, a few contracts indicate where and how clashes in the contract will be taken care of. Others indicate that a markdown rate that will be charged if the company does not keep their end of the deal intact, expecting you to pay everything for any items or administrations officially got. Survey work, administration, renting and rental contracts to decide your commitments.
Ending a few contracts early is lawful in certain examples but you have to make sure that the other party is not harmed. In some cases, you can cut a deal with the entity that you are in agreement with.
The business owner must check with an agreement lawyer to survey each agreement and their clauses that decide what happens when one entity decides to back off. On the off chance that you have quarterly or yearly expense installments coming due, realize whether you can be held actually subject for default, regardless of whether they are obligations of the organization.
Check the Internal Revenue Service site or with an insolvency lawyer to decide whether you have to record a Form 996 to solve such problems.
Physical resources of a business you can sell are known as hard resources. These hard assets incorporate office gear and supplies, structures, stock, materials, PCs, site addresses, vehicles, ventures, records of sales as well as money.
Make a rundown list of all these hard assets that you can sell to start esteeming your all-out resources, which incorporate elusive resources, to help decide if you can exchange and meet your lawful commitments, or how far in the red you are. Notwithstanding your hard resources, you may have an assortment of resources which are not hard in nature but are intangible. Being intangible does not mean that those resources can generate cash.
These intangible assets of your company incorporate your business’ name, logo, business formulas, trademarks, licenses, protected innovation as well as any royalties your business may own.
A business agent will almost certainly help you to identify and get value out of these kinds of intangible resources that your business owns. You can then set a value on these intangible resources and go look for buyers that may be interested in them.