Liquidation is one kind of bankruptcy that is defined as dismissal of an operation, usually in business by making use of its assets to fill up its liabilities. A business can be liquidated with or without the owner's free will. Most of the times, forced liquidation takes place.
These guidelines will help you in the liquidation process. It includes a checklist of items that is essential before the process. You can bring it to your first meeting with your lawyer and accountant. Keep in mind that this list is not intended to supersede the lawyer's advice. The purpose is to use it as simplified guidelines.
- The first thing that you need to know are the debts and the financial obligations of your company. Write down all of your company's mortgages, banks, due taxes, amounts of pension funds, amounts owed or due from suppliers or vendors and outstanding wages to past and present employees.
- You should understand the company's contractual obligations. These include equipments that are used in the office, vehicles and leases for the machinery. You should also add a list of all owned or leased properties, and also the receivable and payable accounts.
- Have the equipment, buildings and land market value estimated realistically. You should also include inventory, raw materials and finished good that have saleable market value. You have to decide carefully on which creditors will have the rights to a property owned by the company.
- Assess if your company can still continue running operations or whether to cease operations during the period of settlement. Make sure that utilities will still continue to operate. Find out which supplier would want to back out and reclaim their goods and which supplier would want to continue doing business with you. Ensure that you will make a solid determination for your people because they will need it during the period of settlement.
- Have a meeting with your employees and make sure that they understand the liquidation process. You should know that the challenging part of being liquidated is the negative impressions of people to your business. You should be prepared in reporting the exchange of property or sale in case you decided to completely close your business.
- The most important thing that you have to do during the whole process is to be honest in all dealings with the lawyers, your staffs, and the liquidation court. You should always stick to your commitments and be responsible in meeting deadlines. You should also be prepared in case you need to file for your final income tax return with IRS which consist employee and corporation transaction.
- You have to pick the right date and place if you want to sell your entire corporation's assets. It is best to have an expert to handle your sale.
- Lastly, you have to review and read all the documents of liquidation, like contracts, and bills of sale.
Liquidation commonly takes place when the owner of the business or the court find out that the company is no longer capable in paying its debts. It is essential to have an experienced lawyer that is expert in handling liquidation processes. You have to be sincere and genuine in your efforts to meet your obligation to the creditors.