The decision to close a business is a tough one. And reasons for closing vary:
Below are potential options to evaluate when closing a business. The best course of action depends on goals, resources, and the reasons for closing. Some questions to consider:
When pressure from creditors creates the reason close, one of the first options mentioned is usually bankruptcy. But there are several types of bankruptcy.
This chapter of bankruptcy is known as the liquidation chapter. In a Ch. 7 bankruptcy the company and its assets are liquidated by an appointed bankruptcy trustee. While unavoidable in certain instances, this approach has numerous downsides including a loss of control over the process.
Ordinarily, Ch. 11 is thought of as the reorganization form of bankruptcy where the debtor emerges with its debts in a more manageable position. However, Ch. 11 bankruptcy is also used to sell the business as a going concern or through piecemeal asset sales. Thereafter, a plan of liquidation may be proposed to wind down the business. This approach is generally the highest cost; however, it may be the preferred route to maximize payments to creditors.
This state court legal process occurs when a business assigns all of its assets to an assignee of its choice. Having the option to choose the assignee allows a business owner to select a person who with knowledge of their industry and the wind down process. The assignee liquidates the assets and distributes proceeds to creditors.
Florida law provides a pathway to dissolve a business entity. The type of entity, a LLC vs an Inc., impacts the procedure.
One of the benefits of following the protocol is to limit the period of time for certain creditors to file suit against the dissolved business. Under this approach filings required by statute are submitted to the secretary of state. Additionally, notices which comply are sent to creditors of the business, if any.
Generally, this approach is the lowest cost option to close a business. Unfortunately, certain factors may limit the effectiveness of this approach. For instance, what if there is a dispute with a business partner about whether to dissolve the business? Or the business partner becomes non-responsive? Depending on the documents governing the company, this option may require Court involvement.
If you have decided to close your business or are assessing whether to close, then speak with a professional to understand which options are available for your needs.
The information provided on this website is for informational purposes only and is intended as a public service. Any questions of a legal nature should be directed to an attorney, and the information on this website is not intended to replace legal advice from a licensed attorney in your state. By using this website, you acknowledge that you may not rely upon or refer to the contents as being legal advice or guidance provided by BMU Law, without its prior written consent.