Liquidation is a form of bankruptcy. Liquidating a business may be forced or voluntary. It is done when the business owners, or the court, determine that it cannot pay its debts. It is imperative that you retain an attorney who is versed in liquidation proceedings. Be sincere in your efforts to meet creditor's obligations, but be realistic at the same time. Below is a simplified checklist of items to consider before liquidating. Print out this list, gather the information, and use it during a preliminary meeting with your attorney and accountant. Be prepared to add specific items as they recommended. This list is not comprehensive and is not intended to replace the advice of your attorney.
Instructions
1. Know your corporation's debts and other financial obligations. Make a list of banks, mortgages, taxes due, pension fund amounts, past and present employees who have outstanding wages and amounts due or owed from vendors or suppliers.
2. Understand your corporation's contractual obligations, including leases of machinery, office equipment and vehicles. List the status of each party's obligations and responsibilities. Include a listing of all property owned or leased, including accounts receivable and payable.
3. Estimate the realistic market value for all land, buildings and equipment. Include raw materials, inventory and finished goods that have a saleable value. Know which creditors have first rights to property owned by the corporation.
4. Fidn out if your corporation is eligible to continue operations or restart during the settlement period. Ensure that utilities will continue, determine which suppliers would want to reclaim their goods and if they will continue to supply goods, and make a solid determination as to which key management people and staff are needed during the settlement period.
5. Be sure that your staff understands the liquidation proceedings. Understand that liquidation may negatively affect your business. If you are completely closing the business, be prepared to report the sale or exchange of property.
6. Be honest in all your dealings with your staff, the lawyers, the government and the liquidation court. Set time periods and stick to your commitments. Be prepared to file a final income tax return with the IRS that includes corporation and employee transactions.
7. If you are voluntarily selling your entire corporation's assets, select the best date and place to hold the sale. For example, you might not want to sell tanning beds in the middle of the summer. Consider hiring a reputable expert who can handle the sale. Finally, read all contracts, bills-of-sale and other documentation involved in the liquidation.
