I am thinking of liquidating my business, but I am going to attempt to market it prior to taking this course of action. What are the ramifications for the new proprietors and the liquidation if I am successful in selling?
Generally speaking, when someone talks about selling their business, it can refer to one of three distinct possibilities. These are: trading the assets of the business, selling the business as a going concern, or offering the shares of the private limited company for sale.
Each of these options has different legal and taxation implications for both the buyer and the seller, so it is recommended to seek the advice of a professional.
In terms of liquidation, if the business or its assets are traded, any debts remain within the private limited structure and are the liabilities of the liquidation. On occasion, certain liabilities might be assumed by the purchaser, such as employee entitlements or vital suppliers. This is dependent upon the type of agreement negotiated as part of the sale.
If the shares of the private limited company are sold, no company remains to be liquidated, as the company continues with its new owner.
Now, what does this mean for the new proprietors? If it is a sale of the assets or the venture as a going concern, then the liabilities are only those that the new buyer has consented to assume as part of the deal, if any. At times, none. If it is the sale of the company’s shares, then the buyer has acquired the corporate structure itself.
Despite the fact that the firm’s liabilities may have been incurred before the buyer was in control of it, as director or shareholder, the company is considered a different legal entity which can incur its own liabilities. As director of the company, it is expected that the new purchaser must guarantee that the company pays the liabilities it has acquired historically, even for the period preceding when this individual may have been a director or shareholder of the company.
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