Choosing to liquidate your business can come about for a number of reasons. Perhaps you’re looking to retire and want to retire the business with you or perhaps you want to heavily downsize it. Whatever the reason, you’re likely looking at a Members’ Voluntary Liquidation
Voluntary liquidation can happen in a couple of different ways depending on the current status of your company. If you’ve decided to take the wheel on proceedings and wind up your company, voluntary liquidation can be an extremely sensible and effective approach. If your company has been deemed insolvent, you’re rather limited when it comes to voluntary liquidation processes and will likely have to file for Creditors’ Voluntary Liquidation, but if you’re company is solvent and still trading then you may want to consider what is known as a Members’ Voluntary Liquidation.
Members’ Voluntary Liquidation isn’t necessarily something you’d turn to in a crisis. You may just want to liquidate your company in this way simply to retire. Perhaps you want to restructure the business or heavily downsize it. The most common use for Members’ Voluntary Liquidation, however, is to acknowledge that a business is severely under-performing and nip it in the bud before things get too difficult.
What do you need to apply for Members’ Voluntary Liquidation?
There are certain prerequisites to applying for Members’ Voluntary Liquidation. For example, you must be able to demonstrate that you have sufficient funds to settle all creditor debts within a year. Once this has been done you must have at least £25,000 surplus in funding. This makes Members’ Voluntary Liquidation incredibly tax efficient, allowing assets in excess of £25,000 to be treated as capital receipts instead of normal income. It is also worth noting that, by law, Members’ Voluntary Liquidation must be carried out by a licensed insolvency practitioner. With the right help and by talking to the right people, the process can be a swift and simple affair, freeing you up to focus on other projects and allowing you to move on as fast as possible.
So what are the benefits to Members’ Voluntary Liquidation?
In order to really make the most of any company liquidation process you really must seek out the best advice and service around. Getting help from the right places can lead to significant tax advantages during the process and you may find that you’re eligible for things you hadn’t even realised. Entrepreneur’s Relief might be an option if your assets exceed £25,000 and this could bring your tax rate down to as little as 10%. Furthermore, you get control of the liquidation process. If the process is voluntary, it means that creditors can’t apply to have the company restored to settle debts (unless there is evidence of malpractice) and complying with reporting obligations can save you a great deal of money and time. Members’ Voluntary Liquidation is time efficient. Once a liquidator is appointed, shareholders can then meet to discuss distribution of assets, and once a summary report is sent to Companies House, the company is struck off and the process is over.
One thing that must be stressed is the importance of seeking out a professional and knowledgeable liquidation and insolvency professional in your area, to help you get the most out of the process and make things easier for you.