What does the term "dissolution" refer to in the context of corporations?

In the context of corporations, "dissolution" refers to the legal process by which a corporation is formally closed. This involves the company ceasing its operations, settling debts, distributing any remaining assets to shareholders, and fulfilling various legal requirements in accordance with state laws.

When a corporation is dissolved, it no longer has the legal capacity to conduct business or to incur liabilities. This process is important for ensuring that all obligations are met and that the corporation's affairs are properly concluded. Dissolution can occur voluntarily by the shareholders or involuntarily through legal judgments or administrative action by state authorities.

Understanding dissolution is crucial, as it marks the conclusion of the corporate entity's existence, as opposed to concepts like increasing capital, transferring ownership, or merging with another corporation, which involve different corporate actions and do not lead to the closure of the business.