Is Liquidation the Best Way to Sell Your Business?

Thinking of choosing how to liquidate a company to pay off your creditors, to deal with bankruptcy, to start another company, or because you cannot continue to run the business by yourself, may be an idea that seems like the easiest way out, however, most of us aren't aware of the intricacies and the impact of liquidating a business, and realize it only after we start the process or have gone through it.

When a business is liquidated, all the assets are redistributed and most of the business owners are not aware of the method in which the redistribution works. Following is the general priority of claims when a business owner liquidates and redistributes a company's assets:

Liquidator's costCreditors with fixed charges over the assetsCosts borne by the administratorEmployee wagesAny worker injury paymentsPending leave amountsCost-cutting payments owed to employeesCreditors who have floating charges over assetsCreditors who do not have security over the assets

It is a very difficult decision to sell your business, you build it with your hard work, you put in your everything to make it work, and you are a business owner till the time you have a business...the moment you liquidate it, you no more own it. This impact of this action hits us when we have done the deed but there is no going back. It is a tough decision to make, and what is tougher is, sometimes liquidating the business does not fulfill the reason of doing it. There are many other factors that need to be considered before you choose to go with this option:

The employees in your business will not have work anymore and will have to be reimbursed from the liquidation. Most of the times the cost of the reimbursement sums up to a much bigger amount than originally thought, there are salaries, severance, pending leave payments, and so on. So it is essential that such costs be calculated accurately to help understand the viability of liquidating the business.

The assets of your business may seem to be worth a lot to you however they may or may not be worth that much in the market. Careful evaluation of the assets to have an approximation of how much the liquidation will gain you needs to be the first step in the process, or you may end up selling your business but still struggling with the credit payments.