When you decide to close down your business, you’ll need to “liquidate” the business’s assets. In plain English, this means you’ll want to turn your remaining business assets, such as office equipment, tools, and furniture, into cash to pay your creditors—or in a best-case scenario, to put in your pocket.
Identify the Business Assets to Liquidate
Make a list of the physical property your business owns, as well as any money owed to the business in the form of rent, security deposits, and unpaid bills (accounts receivable) you still expect to collect. Your list should include:
- business equipment, such as computers, phones, cash registers, and credit card machines
- office furniture, art, and supplies
- real estate
- security deposits with landlords, utilities, or taxing agencies, and
- prepaid insurance premiums you can get refunded to you.
For property, write down a description of each item or category of property, the condition of the property, and who technically owns it—that is, what money was used to purchase the property—your personal funds, a partner’s personal funds, or business funds.
In addition to tangible property, you may be able to sell intangible property that your business owns, such as:
- your commercial lease, if it’s at below-market rent or at a good location (but you’ll probably need the permission of your landlord)
- contracts with suppliers at below-market rates
- contracts with customers at profitable rates (you may need your customers’ permission)
- works in progress that could have some value
- your customer list and your company name (essentially, the goodwill your company has built up)
- intellectual property such as copyrights, patents, and trademarks, and
- remaining accounts receivable.
Call Price Auctions & Estates
Price Auctions & Estates has marketing services provider, marketing assets to qualified buyers in a proper amount of time.
Competitors may also be interested in buying your intellectual property (trademarks, copyrights, and patents) and any works or jobs in progress, as well as your customer lists and company name or product names.
It is a ton of work to go after sites and list the fixtures, furniture, and equipment by on websites like eBay, craigslist, or proxibid.com. Where Price Auctions & Estates sends an email Nationwide and checks on other auctioneers who specialize in auctions for your industry; there are sites that specialize in restaurant equipment, industrial machinery, high-tech equipment, construction equipment, and so on. Many, however do not disseminate the actual sales price for the product, but are happy to only show the list price.
Don’t expect to get more than 60% of an assets value, at most. If you have items that will be hard to sell, such as worn out equipment and office furniture, ask your auctioneer if you should consider donating them to charity for a tax deduction.
As to accounts receivable, don’t forget that they will be much less valuable after you close. So make a high-energy effort to collect them now, or sell them accounts receivable to a factor, or debt buyer, who will either buy your accounts receivable at a fraction of their worth or, for a fee, pay you a certain percentage of the debt up front and the rest when they collect it. (Get more information on accounts receivable factoring.)
Don’t cheat your creditors. Do what you can to get a good price for your business assets—not just for yourself, but because you have a legal responsibility to your creditors to try to get close to a fair market value for your assets.
Fair Market Value is not what you think it means in relation to Retail Costs, it relates solely on what some person is willing to pay fairly for an asset in the climate you are currently operating.
In particular, the directors and officers of an insolvent corporation or LLC (one whose assets are worth less than its liabilities) have a statutory duty to minimize losses to the company’s creditors. But no matter how your business is organized, you commit fraud if you give away or sell business assets at below market rates or put your interests ahead of those of creditors. In other words, forget about selling assets cheaply and pocketing the cash, or worse, giving away assets to friends or family for free.
Deal Separately With Secured and Leased Assets
Set aside any assets that you pledged as collateral for a debt or loan. You cannot sell these assets without the permission of the creditor; selling loan collateral before the loan is paid off is fraudulent and may even be punishable as a crime. You’ll need to speak to the creditor about how to handle the collateral if you can’t repay the debt—whether you will give it to the creditor as is or sell it with the creditor’s permission, giving the proceeds to the creditor.
Likewise, leased property belongs to the lessor, not to you. Your main options are to return the property or to “assign” the lease contract to someone else (the lessor will usually have the right to refuse an assignment, however).
You’ll want to try to get the secured creditor or lessor to settle for less than the amount you owe on the loan or lease.
Get Prepaid Insurance Premiums Refunded
Request refunds on your workers’ compensation premiums and liability insurance premiums, if your policies’ terms allow it. Because businesses pay workers’ comp premiums in advance based on payroll estimates, workers’ comp carriers are accustomed to adjusting accounts each year to return overpaid money, and you should get a refund without a problem. With liability insurance, whether you’ll get a refund depends on the terms of your policy.
Getting Help Liquidating Your Company’s Assets
Some business owners don’t have the time, skill, or desire to sell off their own assets. If you find yourself in this position, there are a couple of routes you can take:
- Hire a Price Auctions & Estates and hold a public auction.
- Pay a Price Auctions & Estates a fee to sell off your assets.
- Assign your assets and debts to York Auction Group to liquidate the business.
- Once the Auctioneer has completed the sale, they will take their commission, then pay off any debts Primary first, then the secondaries in order, until money has run out then send a notice to other creditors that all assets have been sold.
Once you’re done selling your business assets, if there is money left over after paying off your creditors, be sure to follow the rules for making a final distribution of cash to yourself and any other owners.