The present downturn in the economy has made big and small businesses experience financial difficulties. Insurmountable difficulties that are mainly due to enormous debts have caused many businesses to close shop. Understanding the causes of business failures can save the company from possible liquidation. Business liquidation is often referred to as winding up or dissolution. It is the sad end of a company.
For a small business, liquidation is as simple as closing the business or store, selling the stocks or the assets, paying outstanding debts then go home with whatever cash is left after the bills are paid. However, closing or winding up a company is a more complex process- one that will take months to finish. A company’s liquidation sales can last for several months.
Liquidation is one of the choices that a company experiencing financial troubles may take. The idea of company liquidation is to convert the assets into cash and then use the cash to pay the bills or to use the cash to pay the creditors or to take home the cash after a failed business venture.
The liquidation process is begun by ceasing all operations, that is trading, manufacturing and all business deals will be stopped. The justification for this is to prevent the company from incurring additional debts. Mainly, there are three types of liquidation.
First is the members ‘voluntary liquidation where the value of the assets of the company far outweigh the debts. This would mean that the company is solvent.
The second type is the creditors’ voluntary liquidation. This kind of liquidation is pretty much the same as the members’ voluntary liquidation. The only difference is that the value of the assets is not enough to pay the debts-meaning the company is insolvent.
The last kind of liquidation is the compulsory liquidation. This is a court ordered liquidation where a receiver is assigned by the court to evaluate the assets of the company and afterwards see to the liquidation of the assets.
Before finally deciding on liquidation, the business owner should seek the help of professional debt adviser who can offer solutions and advice to halt the impending closure of the company. It is a wise move that should be taken by the business owners and/or business directors because these debt advisers are experts in the field of debt management and they will provide very useful solutions to help the business owner solve the financial problem.
These debt advisers will provide you with ways how to circumvent the liquidation option or if liquidation is finally decided, will provide services that will hasten the process with the least damage to the clients’ interest and in most cases will produce positive results.
In most cases, these debt counselors will offer the client more options. They will explain to the clients that insolvency and liquidation are not the only outcome of business failures.
Although company winding up would mean the end of a company, it is not the end of the business owner’s financial life. It is a known fact that many businessmen are able to rise from the after effects of liquidation and is able to succeed by using the lessons learned during the process of liquidation.