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Tobin O’Connor Concino P.C. Practicality in Practice
  • ~ Washington DC Business Law Attorneys ~

ABC As an Alternative to Bankruptcy


The decision to close a business can come as a relief.  You might be walking away from an unsuccessful venture so that you can start a new one that has greater chances of success.  Perhaps you have decided to get out of the entrepreneurship game all together and just work a boring desk job, ignoring the chorus of entrepreneurship influencers who think that anyone who gets paid a salary or wage is a chump.  Before you can move on to the next phase of your life, though, you must dissolve your current business entity.  Dissolving a business that has failed to become profitable or which was once profitable but has since become insolvent is stressful, because so many people are asking you to pay the money that you don’t have.  Some business owners that are in this situation choose to file for bankruptcy, but there is a simpler alternative, known as assignment for the benefit of creditors (ABC).  For help with the ABC process or other matters related to dissolving an insolvent business, contact a Washington, D.C. small business lawyer.

Assignment for the Benefit of Creditors Is Easier Than Bankruptcy

If you are ready to dissolve an insolvent business, ABC is one of the simplest ways to do it.  Before you can initiate the ABC process, you must get written permission from your company’s board of directors.  After you do that, you can sign an ABC agreement with the company that will be responsible for settling your business debts; this company is called the assignee.  The assignee in an ABC agreement takes over the insolvent company’s assets and liquidates them, much as the bankruptcy court does in a chapter 7 bankruptcy case.

Once the assignee is in possession of your company’s assets, it liquidates them and notifies the creditors listed in the ABC agreement of their right to file a claim for payment of your outstanding debts with them.  The creditors then settle the debts with the assignee.  As in chapter 7 bankruptcy cases, secured creditors take priority over unsecured creditors.  If any money is left after the debt settlement, it goes to the shareholders.

You Still Need a Lawyer When Dissolving a Business

You can successfully settle the debts of your insolvent company without involving the court; this is one of the main reasons that so many companies choose ABC instead of filing for bankruptcy.  Just because you are resolving matters without a decision by a judge, it does not mean that you don’t need a lawyer.  A business law attorney can help you dissolve your business on terms fair to you.  For example, your lawyer can help you draft the ABC or negotiate with the board of directors for terms on which they are willing to agree to the ABC.

Contact Tobin O’Connor Ewing About Dissolving an Insolvent Business

A Washington, D.C. business law attorney can help you wind down the operations of a business that has become insolvent.  Contact Tobin, O’Connor, and Ewing in Washington, D.C. or call 202-362-5900.


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