15.7 The Final Phase: Closing the Business

Both successful and unsuccessful businesses eventually cease operations. When a successful business decides to stop operations, it will sell off its remaining assets, pay off its liabilities, and distribute any remaining funds to the owners. An unsuccessful business may elect to cease operations or may be forced to cease operations. Usually, it declares bankruptcy, a state of financial distress in which the company cannot pay its debts. There are two paths through bankruptcy for companies, Chapter 7 and Chapter 11, and both are overseen by a court.

Chapters 7 and 11 (Chapter 13 is for personal bankruptcy) of the Federal Bankruptcy Reform Act of 1978 (the latest information is available at http://www.bankruptcydata.com ...

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