Each year, millions of businesses open their doors to the public. Though many of them find success, millions of others end up going under. For some, it happens after several years or decades of prosperity. For others, it’s only a matter of months before things take a turn for the worse.
Either way, when a business just isn’t seeing the success it needs, something has to be done to cut the owners’ losses and mitigate the aftermath. Revamping their business plan is the answer for some. For others, selling or finding new investors can turn the situation in a more positive direction.
Looking at the Advantages of Liquidation
Many business owners find that the more favorable solution is liquidating their business. Liquidation Services help companies sell assets or convert them into something of value. From there, those assets are used to repay any debts the company accrued during its less-successful period. This solution comes with certain benefits.
1) Finding a Way Out
On the plus side, liquidation is an effective resolution for a struggling business. It may not solve all problems, but it will provide a legally sound solution and address accrued debts.
2) Absolution
In addition to resolving debt, liquidation takes the burden of overbearing debt off the shoulders of business owners and others who might be negatively affected by the company’s pressing financial issues.
3) Ending Creditor Harassment
Liquidation is also a way to stop creditors from making threatening phone calls and sending angry letters to the business owner. That, alone, can be a major relief when it comes to facing financial problems.
4) Help for Employees
Protection and assistance are also available for employees who will lose their jobs and salaries as a result of the liquidation. With some other courses of action, that may not be the case.
5) Offering a Fresh Start
Another benefit of liquidation is its power to give entrepreneurs a fresh start. If your current business is struggling, you’ll be able to put the situation behind you and start anew once you’ve recovered from the present situation.
Discussing the Disadvantages of Liquidation
While liquidation certainly offers many benefits, there’s generally a downside to everything. Liquidation can also bring about several disadvantages. These may or may not make liquidation a suitable solution.
1) Losing the Business
One of the main disadvantages of liquidation is losing the business. If it has to be sold off bit by bit, it’s no longer a viable company. In many instances, the owner can’t even use the business’s name for a new startup in the future.
2) Legal Issues
Liquidating a business could also bring certain legal issues to light. These might include shareholders having to repay unlawful dividends. Creditors may take action to recover personally guaranteed debts after the liquidation as well. Furlough claims might also arise.
3) Job Losses
Additionally, a major disadvantage of liquidation is seeing employees lose their jobs. For many, a job loss could be devastating. This will affect everyone employed with the company as well as its supply chain members.
4) Destroyed Reputation
Liquidating a business could also destroy the company’s reputation. This might filter down to the owner, managers, and others involved.
5) Monetary Losses
Though liquidation involves selling a company’s assets, the money made in the process won’t go to the business owner. It goes to creditors to repay debts. Any losses on the part of the owner may not ever be recovered.
Weighing the Options
Liquidation may not be the best solution for all struggling businesses. However, it’s certainly a viable solution for many. If your company is struggling financially, liquidation will help mitigate the issue and bring an end to many of the negatives you’re facing.
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