Business Values and Forced Liquidations
Do You Know What a Forced Liquidation Can Do to the Value
of Your Business?
If liquidation is forced on a disabled business owner or on the executor of a
deceased business owner, it can quickly become public knowledge that there
is pressure to dispose of the business, and these results can be anticipated:
Sale of business assets at greatly reduced prices.
Elimination of the disabled business owner’s or surviving family’s primary
source of income.
Sacrifice of any goodwill value that might have facilitated sale of the
business as a going concern.
Difficulty in collecting accounts receivable.
Immediate demand by creditors for settlement of their claims.
Possible liquidation of other estate assets to pay business debts.
The liquidation value of a business is unpredictable and may be substantially
less than the value of the business as a going concern.
The Alternative… A Planned Liquidation:
In some situations, the liquidation of a business interest at an owner’s death or
disability may not be just an appropriate decision. It may, in fact, be the only
possible outcome under either of these circumstances:
The success of the business is completely dependent on the personal skill
and experience of the owner.
There is no successor management in the form of a capable family
member, a co-owner, a key employee interested in purchasing the
business or an outside buyer.
In these circumstances, the question then becomes:
Will the liquidation take place on a forced basis, or will it be planned in
advance to allow for the most advantageous disposition possible?
When liquidation of the business at an owner’s death or disability is the only
viable alternative, the primary objective should be to plan in advance for an
orderly liquidation that results in the greatest possible value for the disabled
owner or surviving family. Please contact my office if we can help