JOINT STOCK COMPANY

A joint stock company is a specific form of business organization that is structured like a corporation, but is treated like a partnership in the eyes of the law. Such companies are no longer common in the United States, but are still frequently found in Europe. Like a corporation, a joint stock company has a legal identity distinct from the legal identity of whomever owns it. Its owners hold shares in the company that can be freely transfered to others, and the company continues to exist even if its original members no longer retain ownership of it. Like a partnership, the owners of a joint stock company have some limited liability if the company goes bankrupt or is sued. Joint stock companies are easier to establish than corporations, but they share the ability of corporations to raise large amounts of capital.

Even for the prosperous governments of Britain and the Netherlands in the seventeenth century, settling the North American continent was too expensive a proposition to shoulder on their own. Before Christopher Columbus's (1451–1506) discovery of the New World was a century old, the British government was granting exclusive charters to joint stock companies like the Levant Company and the Muscovy Company to establish colonies around the world. By pooling the wealth of many private businessmen, these companies could undertake the huge expense of funding colonial settlements until they became profitable. The first joint stock company in America, the Virginia Company of London, failed to produce a profit in Jamestown, Virginia. After 18 years of losses, Britain dissolved the company in 1624 and took over the settlement. The Plymouth Company, a joint stock company founded to settle New England, was a little more profitable, and the Massachusetts Bay Company (founded in 1629) successfully established a colony in Salem, Massachusetts; Boston; and Connecticut. Another joint stock company, the Dutch West India Company, settled present-day New Jersey and New York before England seized the territory from the Netherlands in the 1660s. The joint stock companies' charters gave them wide powers to recruit armies, establish political institutions, and collect taxes, and because all of its owners lived in the colony the Massachusetts Bay Company actually achieved independent self-management. This kind of independence made the British Crown very nervous, however, and in 1684 it cancelled the Bay Company's charter and ruled the colony directly.

See also: Corporation, Partnership, Settlement and Economic Development