Shutting Up Shop: The Steps Toward The End
Hey, you tried. Lots of businesses go under and in fact, it’s actually the majority. Small businesses are perhaps the most exciting ventures in all of the business world. But an experienced entrepreneur will inform you that at least 80% of small businesses will collapse and fail inside of 18 months since they began. But it’s understandable that you don’t want to put yourself in a bowl that is marked ‘just like everybody else’. However, if you don’t stand and turn to face the music, you could end up doing irreversible damage to your reputation.
It’s never easy to admit that something you loved, cherished and ran with your blood, sweat and tears as relinquished from your grasp. A small business requires so much effort to get off the ground that when it fails to live up to expectations, you can freeze with the sorrow. If you can gather your thoughts and emotions quickly enough, you can save yourself money and wipe the stain off your legacy. Shutting up shop and taking steps toward the end is easier than you may have previously thought. The key attributes you need are a level head, decisive decision making and quickness in taking action.
The decision to shut up shop
Inform respective partners
It’s nobody’s business how well your company is doing. Truth be told you have no obligation to tell anyone except your shareholders and partners. No media, friends or family members need to be or should be informed about the dealings of your business. The internal struggle is always going to be there and business partners always recognise this before they get involved with a small business. It’s not hard to spot a business that is becoming insolvent as quarterly reports can easily be read and understood. Before it gets to a stage whereby your business partners have to read about the collapse of your business in the newspapers, inform them about your situation.
The reason why you want to inform partners early is so that they can start preparing for a gap in their finances or inventory. The status of their business will change when the partnership has been dissolved; such as becoming a sole trade once again. They will more than likely have to get a reassessment from a company house i.e. ASIC. Their bank will also need to be informed of the sudden changes as financial obligations will be terminated and thus their fiscal strength needs to be remeasured. If they have chosen to take on any liabilities when the partnership ends as agreed by you both, this also needs to be declared by the partner. If you take these steps, there may be something left in the tank for a future relationship. Giving another business time to prepare for a shock will always be met with some gratitude regardless of any initial emotions.
Appointing a liquidator
Once you’re ready and have made preparations for the company to be liquidated, it’s time to appoint a liquidator. Right about now you might be asking yourself what is company liquidation? Put simply, it’s the act of ending or dissolving a business. The activities you’ll undertake are winding up of the company such as selling assets, distributing any assets remaining to either partner’s or your shareholders. Lastly, you’ll be paying off creditors. It’s the legally required process of shutting down a company for good. This was its name is struck off the registry and can no longer function as a business. Therefore all trade ceases from that point onward.
The liquidator will carry out certain investigations that must be completed before the company breathes its last. They will carry out an investigation of any illegal behaviour by the director or CEO. If any shady dealings have taken place such as a funds being stolen, the crimes will be documented and those involved will have to answer for them. They’ll also see if any payments to creditors are to be preferential such as paying back a larger creditor first or making good on a contractual obligation. If there are any hidden assets, they will be recovered and possible legal action may be considered. Generally speaking, a liquidation may take around 6 months to a year, but in some cases even longer.
Buying back assets
Once a liquidator has officially begun the winding up of the company it’s your opportunity to perhaps limit the damage that may be done to you personally. Assets will be up for grabs as the liquidator will look for buyers or put them up on the market. Equipment such as office tables, chairs, printers, computers and such will be first to be sold or auctioned off. Non-current business assets such as buildings, factories, warehouses and commercial offices will also be made ready for sale. If you would still like to own any of these assets, you can simply repurchase them from the liquidator.
Any of the assets may have contracts still attached to them which will end in the event of dissolving the company. Therefore if you are interested in buying assets you will have to strike new contracts with the companies that own them. However because a liquidator is looking for a quick sale to speed up the process, you are more than likely going to be given the first choice. It’s recommended to seek the advice of a financial advisor before you buy back any of the company assets. Bear in mind that some assets may have security checks involved such as commercial offices. A background check and your previous business dealings may need to be investigated before the asset can then be bought.
At first, it’s going to feel like a silver arrow through your heart. Shutting down business operations and realising that insolvency has taken over is a hard pill to swallow. Since the whole process of liquidating a company can take more than a year, it’s far better to bite the bullet and appoint a liquidator than to hold on. The longer you remain inactive the more money you lose and increased damage is done to existing partnerships. You can buy back any assets you would like. As soon as the liquidator has begun dissolving the business, directors are free to move onto new ventures so those assets may come in handy for another business project.
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