How to Liquidate a Company
There are several ways on how to liquidate a company. And to make this successful, an entrepreneur should prepare a set of exit strategies, even if he is not thinking of liquidating business, so that he can lessen the financial risks in case that he is forced to sell, bequeath, or close down his company.
While entrepreneurs create a concrete plan that will allow their companies to grow, most of them forget to prepare an escape plan to reduce the financial risk in case they want to quit in their business.
To prevent or at least reduce the risks associated with quitting or leaving a business, this is the list of ways on how to liquidate a company according to experts:
Traditional Liquidation
This way of liquidating a company is probably the most simple because entrepreneurs will only have to close the business doors and sell the assets in order to repay creditors or shareholders.
However, one major downside of liquidation is that clients, business partners, and employees will frown upon such move and it can destroy the entrepreneur’s reputation and relationship with these people.
Selling the Company to a Buyer
By selling a company to a buyer who knows how to effectively run a business, an entrepreneur can preserve his reputation and legacy. Meanwhile, selling a reputable or financially viable company will be easier because interested parties will usually include customers, family members, and employees.
Handing Down a Business to Children or Family Relatives
Some entrepreneurs have grown tired running a business that they decided to quit and handed down the responsibility of handling a company to their children or family relatives. However, bequeathing a company to a family member should be planned in advance to avoid family feud and jealousy.
Acquisition
This is one of the most common exit strategies employed by entrepreneurs especially those who have a financially viable business. The reason why this strategy is popular among exiting businessmen is that it allows them to negotiate the market value of their company to the potential buyers.
However, acquisition has its dark side because the products and employees of the merging companies may not go well together and may end up destroying each other.
Initial Public Offering (IPO)
IPO is only ideal for companies which are funded by professional investors who can take the companies to the public and sell the shares which are based on the potential or future earnings of a business. While this may give the founders huge sums of money, they should accept the new arrangement in which they are left with a small fraction of their business (which also means less control and influence on how the company is managed).
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