According to the Small Business Association, one out of every three startups close its doors within two years. Only about half of startups last more than five years. The point of mentioning this isn’t to scare hopeful entrepreneurs, but to point out that not all businesses lead to a prosperous career. The possibility of winding down a business is very real. You may need to consult with a business lawyer in order to do it correctly
What Does It Mean to Wind Down a Business?
In business terminology, “winding down” essentially refers to the legal processes and steps that must be taken when closing a business. There’s so much more to it than just posting a “going out of business” sign on your door and selling everything.
The exact process differs depending on a number of factors, such as if you filed for bankruptcy or if you have any outstanding accounts receivables. For the most part, though, here are a few steps that almost every business will have to take during a wind down:
Liquidation — Liquidate as many of your assets as possible. Get rid of all your inventory by holding a going-out-of-business sale. Liquidation also involves selling company equipment, and even the building and property if you’re the owner. A real estate lawyer can help with the last point.
Creditor Repayment — Use your remaining cash to settle existing debts owed to suppliers and creditors. If you have multiple debts, then you may need to repay creditors according to their subordination level.
Asset Distribution — If assets remain after all debts have been paid, then they will be distributed among the owners according to their portion of ownership. Owners are also responsible for debts in proportion to their percentage of ownership.
We’ll Help You Wind Down
Contact Curtis & Casteel Law Group to ensure you close your company without missing anything that could land you in legal hot water. Winding down a business correctly can be complex; so we recommend legal consultation.
Edited by Justin Vorhees
Business Consultation for Starting or Closing a Business
Proudly serving the people of south Snohomish County, north King County, and the Greater Seattle area