How to Liquidate a Commercial Business in Texas?

How to Liquidate a Commercial Business in Texas

Liquidating a commercial business in Texas involves several key steps to ensure the process is handled legally and efficiently. Here is a detailed guide:

1. Board and Shareholder Approval

If your business is a corporation, your first step to liquidate a commercial business in Texas is to convene a board of directors meeting to vote on the decision to liquidate the business. You should document this decision in a formal resolution. You should also obtain approval from any shareholders as required by the bylaws or articles of incorporation. If you are a partnership, obviously all partners will need to approve the liquidation.

2. File a Certificate of Termination

In Texas, there is specific paperwork required to be filed with the state when liquidating a commercial business. You will need to obtain and fill out the Certificate of Termination (Form 651) from the Texas Secretary of State. Then request a Certificate of Account Status from the Texas Comptroller of Public Accounts, which confirms all taxes have been paid. This is followed by submitting the Certificate of Termination and the Certificate of Account Status to the Texas Secretary of State. Both the Texas Secretary of State and the Texas Comptroller of Public Accounts have website where the forms can be downloaded and help can be accessed if needed during the process.

3. Notify Creditors and Settle Claims

You will need to inform all known creditors and claimants of the business’s dissolution. This can be done through direct communication (letters) and a public notice in a newspaper. You will also need to pay off all outstanding debts and obligations. If you do not have the cash available, you may try negotiating a settlement, if full payment isn’t possible. If you are low on cash, you may need to liquidate assets in order to fulfill your financial obligations.

4. Liquidate Assets

If you don’t already have a current inventory of all of your business assets, you should start this process as early as possible. If you do not have staff available and you are not able to take the inventory, you may want to reach out to an appraiser or auctioneer for professional assistance. Once you have created a comprehensive inventory of all business assets, you will need to determine if you are going to liquidate the assets yourself or hire a professional. If you plan to handle the liquidation yourself, you may need to determine the market value of each of the assets so you will know how to price them. A professional appraiser can be hired to place values on the personal property and/or real estate owned by the business. Keep in mind that most appraisers specialize in either personal property or real estate and one appraiser may not be able to handle both.

Sale of Assets: If you do not have the time, expertise, and knowledge of the market for your assets, you will need to hire a professional liquidator or auction company. If time is of the essence, a professionally conducted auction by an experienced auction company will be your only way to ensure an exact exit timeline. Keep in mind, if your business has liens filed against its assets when the auction company conducts the auction, it will be required by law to pay the net proceeds of the auction to the lien holder up to the amount of the debt “pay-off” amount.  Net proceeds in excess of the pay-off will be available to the business owner.

5. Distribute Remaining Assets

After the liquidation of assets and all debts have been settled, you can distribute cash or other assets to shareholders, partners, or members according to the ownership structure and relevant agreements. Be sure to keep detailed records of all distributions to ensure transparency and legal compliance.

6. Cancel Permits and Licenses

Be sure to cancel any business licenses and permits issued by the state of Texas and local governments. If applicable, cancel any professional licenses held by the business as well.

7. Close Tax Accounts

With consultation of your accountant, you need to file the final federal tax return and settle any remaining tax obligations with the IRS. Don’t forget to notify the IRS and the Texas Comptroller of Public Accounts to close the business’s tax accounts.

8. Notify Employees

Inform your employees about the business closure and their final date of employment.  Ensure all final paychecks are processed and distributed in accordance with state labor laws.  Provide information on health insurance continuation through COBRA if applicable. This can be an emotionally charged process, as some employees may be concerned about finding another job, losing their health insurance, etc. Let the employees know when they will receive their final paycheck and inform them of their ability to file for unemployment compensation.

9. Terminate Contracts and Leases

Identify and review all ongoing contracts, leases, and agreements. Send termination notices to landlords, service providers, and other parties with whom the business has contracts. Be sure to review the contracts so that your terminations are compliant.

10. Maintain Records

Keep detailed records of the liquidation process, including financial documents, correspondence, contracts, and tax records, for at least seven years or as required by law. Make sure these records are stored securely and are accessible for future reference if needed.

Additional Considerations to liquidate a Commercial Business:

      Consider consulting with a lawyer and an accountant who specialize in business liquidation to ensure compliance with all legal and financial obligations. If the business cannot settle all its debts, filing for bankruptcy might be necessary. This involves different procedures and legal requirements.

By following these steps, you can ensure that the liquidation of a commercial business in Texas is conducted in a structured and legally compliant manner.

Would You Like To Visit With An Auction Professional?

A representative of Jones Swenson Auctions would be happy to review your potential auction situation. Call (512) 261-3838 or go to JonesSwenson.com for a no obligation consultation.

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