The process of liquidating the business is straightforward and requires little planning on the part of the entrepreneur. The process of liquidating the business involves selling all of the business’s assets and repaying the business’s creditors (Henricks, 2009). The money remaining after the debt payoff belongs to the equity holders of the firm. Liquidation of the firm provides the benefit of being an easy and natural conclusion to the business and allows the entrepreneur to make a clean break from the business.
The major disadvantage to liquidating the business is the prices which the entrepreneur may receive for the firm’s assets. The entrepreneur may receive market value, at best, for his firm’s assets, resulting in a significant amount of “money left on the table” (Robbins, 2009). Additionally, intangible assets developed by the firm may not be sold at all and instead dissolve with the firm. These assets may include customer lists, processes, brands, goodwill and other similar assets.
Liquidation can take place at any life-stage of the firm. As soon as the firm begins acquiring assets that may be sold, liquidation can take place. An entrepreneur’s primary concern is ensuring that the firm has more assets than outstanding debt. An entrepreneur would be poorly advised to liquidate assets resulting in a loss on the equity investments made in the business, although he/she may be forced by circumstances to do so.