I'm going to just assume everyone moved over to Smash and there closing for tax etc. reasons but still sort of stinks.

It should be noted that the separate company, Sora Ltd., that Sakurai started and Nintendo has a stake in, is still a going concern.  Just the studio that was co-financed by Sora and Nintendo is closed.

Oh woops, I totally skimmed over that sentence in the article.  My bad!

Yeah, I have to imagine that most if not all of those people who had been part of Project Sora will be incorporated into Sora Ltd. to work on Smash Bros. Nintendo and Sakurai seem pretty determined to have these two Smash games out sooner than we've seen in previous generations, so beyond enlisting Namco I expect that Sora Ltd will itself be expanding once again to accomodate these two games.

I really don't understand the logic in forming a studio just to make a single game, even if the parent division is still around.  Kid Icarus Uprising seemed to sell well enough in Japan, but did it just not do particularly well in the West?

It's a business arrangement thing. I am not sure of the actual specifics, but its how a lot of anime are made. A production company is formed between differing partners, "makes" the product and is dissolved at the end as there are no longer any need for the company to continue existing since there isn't going to be a follow up season. They tend to be named "Project whateverthenameis".

My guess is a large part of it is because of Japanese employment law makes it easier to dissolve the company than to lay off staff. Japan has far stronger employment laws than the US where they are nearly non-existant in comparison.

I was hoping Project Sora was going to continue to revive old games such as Ballon Fight and Ice Climbers.

Oh man, where were you when this was reported earlier on Kotaku?  You should have seen the crazy, inane, and uninformed comments there. 

This is why these are the only forums I participate in, except maybe gamefaqs.

Hmm...I was under the impression that anime series just had "production committees" composed of the companies working on or marketing a project, with the "committee" disbanded once the production ceased.  I didn't think they were actually considered a real company.

It's actually commonplace in the US film industry as well.
  And I agree; NWR is one of the most intelligent places on the net, period. So, thanks everyone for not being morons! lol

Answer: I don't go to Kotaku.

Secondly, good posts take time, time better spent not trying to take on the entire internet.

As far as I know they are "Real" companies. Have a look under P here. Look at the "Projects". The vast majority of them are formed for a very specific function. You won't go to the trouble of making them if it didn't serve a purpose.

Project Sora's disbandment might not be employment related as it might not have contained any production employees. It very could have well been a telephone in an office somewhere. Whatever function it served, it ended with Kid Icarus. My first guess is likely to be wrong, it could simply be a holding/shell company to facilitate some temporary transfer of tech/copyright without entangling each other at the end of the project.

The cycle of hiring and firing employees in the western development scene is very destructive and isn't very good for building institutional knowledge, trust or any sense of loyalty to each other, let alone the company. I don't think Nintendo is into that sort of thing.

The production company for Sky Captain and the World of Tomorrow is basically a shell company. They even pointed it out in the DVD special features(Not online as far as a quick search goes). The company was formed just to make the movie and everybody was in on it.

Hopefully the employees are shuffled in to other Nintendo development teams or subsidiaries. Actually, considering how career employment in Japan usually has you sticking to the company, that's probably exactly what will happen.

Especially in the South where its viewed as a privilege to be working at the Whim of the Employer.

I'm quite sure this was always the plan for this studio. 

You're right, I think in an Iwata asks it was even said as much long before kid Icarus was released.

A lot of companies put together "joint ventures" with other companies. The agreements made to form those companies often include the fact that the life of the joint venture ends at the completion of certain of certain tasks. It's a legally valid way to set up and dissolve a company.

My guess is that it was all done for accounting/management purposes. Like the fact that Sora Ltd. is basically just a front for Sakurai to have the authority to do whatever the hell he wants (which he said as much during GDC), Project Sora just funneled the money to the devs without the usual Nintendo oversight. And I agree with oohhboy about the anime projects. Kid Icarus was anime in video game form, so maybe that was even more true than we realized.