What does 'dissolution' refer to in a business context?

In a business context, 'dissolution' refers to the legal termination of a partnership or corporation. This process signifies the end of the legal entity's existence, which can occur due to various reasons, such as the fulfillment of the entity's purpose, mutual agreement among the partners or shareholders, or by legal order.

During dissolution, the business must settle its debts and liabilities, distribute remaining assets among its owners, and complete any necessary legal formalities to ensure that the entity is appropriately closed according to applicable laws. Understanding this concept is crucial for paralegals and other legal professionals involved in business law, as it involves numerous legal considerations and compliance with state regulations regarding the winding up of a business entity.