While selling a company is one of the more popular ways to relinquish ownership rights of a business, owners who are unable to find buyers can opt to liquidate their company’s assets. Liquidation is the process of redistributing and selling your business assets—equipment, furniture and other business property—to generate liquidity or cash. The process is also referred to as “dissolution” or the “winding-up” of a company’s corporate affairs.

Businesses that liquidate their assets may apply for either a compulsory liquidation (i.e. a creditor’s liquidation) or a shareholder’s liquidation, which is voluntary and applies to companies that are solvent. Planning an exit strategy prior to the liquidation sale helps assure that all aspects of your liquidation are dealt with appropriately.

Step 1: Speak with Your Bank, Accountant and Lawyer

Whether you do it yourself or hire a consultancy for guidance, the liquidation process can be long and complex. Since every case is unique, enlist a licensed accountant or attorney to help you devise a liquidation strategy that is right for your business.

Be sure to present your plan of action to creditors (those who have lent you money), since you’ll need their approval before beginning the liquidation process. You’ll need to first pay creditors, then shareholders and lastly business partners.

Step 2: Identify and Document Your Assets

Before you sell any equipment, fixtures or merchandise, first assess how much they are worth. Gather documentation, such as warranties, serial numbers and photographs, and note the condition of each item. For old items or merchandise showing wear and tear, consider donating them to charity for a tax deduction. For more valuable items, you can consult a qualified appraiser who can provide you with a written appraisal that estimates the fair market value of your assets.

Scrutinizing your assets’ value closely will pay off once you’re ready to hold your liquidation sale. It will also make your life considerably easier in the event creditors or the IRS question your sale.

Step 3: Appraise the Liquidation Value of Your Assets

Before selling your assets, consult your appraiser on the amount you can expect to recover in a forced-sale situation. According to the U.S. Small Business Administration (SBA), this amount is usually at least 20 percent less than the retail value of the item.

Use the written appraisal of your business assets to estimate your net gains after deducting sales costs and business debts. Generally, these include everything from sales commissions and labor expenses to storage fees. This exercise should also give you a better idea of whether to hire an auctioneer, broker, dealer or other liquidation sales expert to handle your sale.

Step 4: Choose When, Where and How to Sell Your Assets

The liquidation method you choose will ultimately depend on the type of business and industry. For example:

  • Use a negotiated sale if dealing with multiple buyers, such as competitors, customers and suppliers. Unlike auction sales, a negotiated sale gives you more time to sell your assets and find the best buyers for your items.
  • Use a consignment sale if you wish to assign a dealer to sell your assets and reimburse you after the sale based on a set amount or percentage. For example, your dealer may deduct a 30-percent commission from the gross sales amount of each item.
  • Sell your items through a public auction or online website. Government resources, such as the Federal Trade Commission’s Internet Auction Guide, explain the intricacies of online auctions. Alternatively, contact the National Auctioneers Association if you prefer to hire a professional auctioneer to conduct your liquidation sale.

Next, assemble a timeline that caters to those who will be most interested in buying. Schedule the sale during a season or time of the year when there will be high customer demand for your items. The same applies when deciding the location of the sale. If you sell goods in a retail space, you’ll likely want to hold the liquidation sale at your store. Conducting the sale on your business premises will help stage items in a surrounding that makes sense contextually, thereby increasing their appeal. Think about how furniture stores display pieces in model room displays or how shoe stores can showcase shoes on mannequins—this context makes the items more appealing. In fact, the SBA reports that moving restaurant equipment from its normal place of operation can slash its value by as much as 50 percent.

To maximize your results, consider hiring a consultant that specializes in facilitating “going out of business” sales for retailers and companies. Additionally, contact your industry’s trade journals and magazines to find out deadlines for ad submissions that will promote your sale to potential buyers.

Step 5: Finalize the Paperwork

Use a non-recourse bill of sale to transfer the title of your assets during the transaction. Make sure that each bill of sale clearly states that the items were sold “As is, Where is.” This will minimize your liability in the event that a buyer decides to collect compensation due to disputes over implied warranties of merchantability or fitness.


Even after planning a liquidation strategy and consulting with legal and accounting experts, your written appraisal may reveal that an alternative exit strategy is better for your business. Finally, you can always choose to liquidate some, rather than all, of your business assets if you’re looking to generate quick cash.