Liquidation
Definition
The formal process of closing a business by converting its assets into cash, paying outstanding debts, and distributing any remaining funds to shareholders or owners.
Why it matters
Understanding liquidation is important not just for failure scenarios but also for successful exits. Founders who sell their business may structure the transaction as an asset sale that effectively winds down the old entity.
Example
A founder decides to close her company after a better acquisition offer fell through. She follows the formal liquidation process, selling her stock and equipment, paying suppliers and HMRC, and distributing the remaining £15,000 to herself as the sole shareholder.
Related terms
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