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What Is Corporate Dissolution?

In business, the closure of an incorporated company is referred to as corporate dissolution. The complexity surrounding the operation of such a company rarely allows for a simple closing process, and instead the company's owners need to go through several special steps to ensure the proper shutting down of the company. Corporate dissolution can either be voluntary, decided upon by the board of directors running the company, or forced by the government or another legal institution with regards to the company's operations. Both cases lead to slightly different procedures that lead up to the dissolution, though they're more or less the same in the basic sense.

The dissolution of a company must first be decided upon by the board of directors, almost always unanimously. This is used to prevent malicious business practices that can lead to the financial harm of those who have interests in the company's operations. In some cases, not only the board of directors, but the major shareholders are also invited to participate in the vote for the company's closure. After deciding that the closure is demanded by the majority of the company's key personnel, all of their creditors need to be informed of the decision, in order to determine a course of action for resolving any outstanding financial disputes.

Taxes are also an important aspect of a company's dissolution, and there is usually a final tax imposed on the company which needs to be taken care of before its closure, part of which covers the final salaries of employees working for the company.

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