Businesses fail all the time, but it’s always stressful to experience and go through. But sometimes, there is no option but to cut your losses and to opt for voluntary liquidation, but what are the costs and benefits of this option?
About Liquidation
First of all, we need to ask ourselves, what is liquidation? Voluntary liquidation occurs when a company decides to cease trading because of losses and debts. When this happens, a liquidator will step in to sell off assets and pay off any money that is owed to creditors by the company. They oversee the whole process.
Pros
Voluntary Can be Better than Compulsory
If you can choose to cease trading of your own accord, this is always best. Things can get more messy and difficult when a creditor has to force a company into liquidation. At least if the process if voluntary, you will be able to control what happens and prepare yourself for the process. With a process as stressful as liquidation, this is not something to be underestimated.
All Outstanding Debts Can be Written Off
Once the liquidation process has been completed, you will be free from debt. The assets that are sold by the liquidator will generate the money that can be used to pay off creditors. So, all the outstanding debts that you were struggling to pay off will be taken care of for you. This is a big relief for many people.
The Worry and Stress Will End
There is a lot of stress involved in running a business when it is failing. It can be a positive thing to recognise when the game is up, and it’s time to throw in the towel. All that worry and stress will be over as soon as the process has come to an end. You can then move on and think about what you should do next.
Cons
All Assets will be Gone
Once the business’s assets have been sold, they will be completely gone. There is no turning back after that point; it’s a finite decision that doesn’t allow you to change your mind. This is simply the nature of the process, but it is something that you should keep in mind when making your decision. It will require some thought and consideration.
It Can be a Costly Process
There are costs involved in hiring a liquidator and going through the whole process. These costs might be worth paying if the process manages to lift you out of your problems. But they are still costs that could affect you financially. So, make sure that you know what the costs will be and how you will cover them before you actually start the process.
You’ll be Investigated
You will be investigated by the liquidator. As they do their job, they have to go through the company’s finances and history. And you have to give them access to everything. This might not be a big deal for you, but it can feel like an invasion if you’re not totally prepared for it all.
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