If you own a small business, you probably know that it’s not always easy to keep your business afloat. If you’re struggling to pay your bills, you might even consider selling your business.
But before you sell your business, there are a few things you should know first.
In this article, we’ll explain what you need to know about liquidating your business.
What does ‘liquidate’ mean?
The term ‘company liquidation’ refers to the process by which companies go out of existence. This can happen for various reasons, such as bankruptcy or going into administration. In most cases, when a company goes bankrupt, the assets are sold at auction to be distributed among creditors. Companies will need external help throughout the liquidation process.
However, sometimes businesses choose to close down voluntarily instead of being forced to do so. For example, if a business owner wants to retire from their job but doesn’t have enough money saved up to cover all of their expenses, they may decide to shut down operations until they get back on track financially.
How long does it take to complete a company liquidation?
It depends on how complicated the situation is. The more complex the case, the longer it takes to resolve. For instance, if a company owes millions of dollars to multiple creditors, it would likely require several months to settle everything. On the other hand, if a company only needs to repay one creditor, it usually won’t take much time to sort things out.
It also depends on whether the company was operating legally or illegally. A legal operation requires less paperwork than an illegal one.
Can I still use my business after it closes?
Yes! You don’t necessarily lose any rights once a company shuts down. You can continue using your business name and trademarks as long as you haven’t been convicted of fraud or embezzlement.
You can also apply for new licenses under different names. But make sure that these licenses aren’t already taken because otherwise, you risk getting sued.
Is it possible to start another business right away?
Yes, it is. Once a company is closed down, you can open a similar business under a different name. And since you’ve kept all of your intellectual property intact, you shouldn’t face many problems starting over again.
Are there any tax implications?
There are two types of taxes: income tax and capital gains tax. Income tax applies to profits earned during the year, whereas capital gains tax applies to profit made through asset sales.
As far as income tax is concerned, you must declare any earnings above $75,000 per annum. So if you earn $100,000 annually, you’d owe $7,500 in income tax.
On the other hand, capital gains tax isn’t applicable unless you sell certain assets like real estate. Otherwise, you wouldn’t incur any additional costs.
Liquidating your business is never fun. However, knowing what steps to take beforehand could help reduce stress levels while making sure that you get paid every last cent owed to you.
