What options are available to a business owner who wants to close their business?

‘Dissolving a company’, ‘selling a company’, selling a business’, ‘going out of business’ - there are so many different terms it can feel like a minefield. The good news is that if you are a business owner and want to close your operations, there are many options available to you, depending on your circumstances.

Options range from sell the company to another company or individual, liquidating the company's assets and distributing the proceeds among creditors and owners . A third option is to close the company and then establish a new company with some of the same owners and employees and assets. But when should these options be considered, and how does it work?

Selling your business to another company or individual:

We must first start with a couple of definitions:

The Company:  This is the organisation that owns the asset, employs the staff, incurs the creditors, and runs the business.  It has a group of owners who each have a share.  It is run by a Board of Directors.  

The Business:  Is what the Company does to earn money.  

For most small businesses the Owners and the Board are the same but, it is important to remember that the options available depend on whether we are dealing with the Company or the Business.

So, we can sell your business and assets to another company, which may be interested in buying the entire business or just certain parts of it.  You could also sell the company shares to an individual who has the capital and expertise to take over operations and grow the business. This is a great option for profitable businesses with a good reputation, but it may not be right for some businesses.

It might also be possible to lease your business premises and equipment, allowing you to continue operating while someone else handles all the heavy lifting. This option gives you some flexibility while still allowing you to earn a passive income.  

Liquidating your business:

If the purpose for the business is over or its sale in one piece is not possible then the best option is likely to be "liquidation," where you sell all your assets, hopefully pay off creditors and then pass any surplus to the shareholders before dissolving the company.

If all the creditors can be repaid, i.e. the Company is solvent, then we would likely recommend a Members Voluntary Liquidation (an MVL), which you can find out more about here.  

If not, i.e. the company is insolvent then we are likely to recommend a Creditors Voluntary Liquidation (a CVL), which you can find out more about here.

If your primary goal is getting out of the business and securing a swift and guaranteed exit, then liquidating may be the best option.

You will not necessarily be precluded from keeping some of the company's property for a future project but, Liquidation is a tax point so there are rules to follow in terms of valuation and accounting for any benefits.  

Closing the business and restarting:

Future projects can cover many things including establishing a new company with some of the same assets and employees etc. However, there are rules in place for this option when the Company is solvent and even stricter rules if the company is insolvent.

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If you're thinking about closing your business, it's important that you understand what options are available to you so that you can make an informed decision about what's best for your company. Speak to one of our professionals today, who can help you make the best choice for you and your business: https://www.frostgroup.co.uk/contact

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