Should you sell your business or liquidate?
Are you stuck between deciding whether you should sell your business or to liquidate? In this article we will take you through the important factors you need to keep in mind.
The first step
If you are interested in selling your business, first you have to decide which route is the most suitable for you.
What is solvent liquidation?
Solvent liquidation is the process of winding up a company which is of sound financial health and has plenty of cash, as a fast route to exit. Upon winding up, the company will stop doing business and employing people. Simultaneously, the company will be struck off the companies register at the Companies House.
Once you liquidate, all of the assets will be sold off to pay off the debts of the company. The amount remaining from sale of assets goes to shareholders.
The Members’ Voluntary Liquidation is the most tax efficient exit tool. It will allow you to take advantage of a lower rate of Capital Gains Tax and the Entrepreneurs Relief scheme to minimise tax liability, withstanding that you are eligible for it. Click here to find out more.
However, if you want to generate the best financial outcome, selling your business is an alternative which may prove to be more lucrative for the following reasons:
Turnkey business opportunity
Prospective buyers will be very interested in purchasing your business. It provides them with a readymade solution which will require little or no investment once you purchase it both in terms of time and money.
As an established business, the new owner can take over the business which will have a database of supplier contracts, tools and machinery, existing base of customers. By selling your business you will transfer all of the above to the new owner.
If you take the solvent liquidation route, first you will have to liquidate assets and using the amount received, repay the creditors. Then the funds can be taken out tax efficiently because of the nature of this exit route.
Conversely, if you are selling your business, you will get paid based on a number of factors which include reputation, marketing power, rate of returning customers, and financial performance.
If you want an exit solution which allows for business continuity but no or limited involvement from you once the business is transferred, selling may be a good option for you.
You may want to pass the key on to another with the intent of continuing the legacy of the business.
Maximise business potential
Your business may be in need of long running investment. In this case, consider a change in direction and a new pair of hands to take the business onto achieving higher targets and a higher potential.
Please note that the information provided on this page:
- Does not provide a complete or authoritative statement of the law;
- Does not constitute legal advice by Net Lawman;
- Does not create a contractual relationship;
- Does not form part of any other advice, whether paid or free.
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