A joint-stock company is a business entity in which shares of the company’s stock can be bought and sold by shareholders. Each shareholder owns company stock in proportion, evidenced by their shares. Shareholders are able to transfer their shares to others without any effects to the continued existence of the company.
Joint Stock Company
What is a ‘Joint Stock Company’
A joint stock company is an organization that falls between the definitions of a partnership and corporation in terms of shareholder liability. In the United States, shareholders of joint stock companies have unlimited liability for company debts, but in the United Kingdom, shareholder liability is limited to the nominal value of shares held by each shareholder.
Explaining ‘Joint Stock Company’
In 17th-century England, joint stock companies were the forerunner to the modern business structure of a corporation. In many cases, these companies were chartered by the Crown of England for the purpose of undertaking high-risk endeavors that would return a profit. Capital was raised through the investment of wealthy individuals who would share in the profits with liability limited to the amount of their initial investment. In American history, the Virginia Company of London is the most familiar joint stock company.
Historical Example of a Joint Stock Company
In 1606, King James chartered the Virginia Company of London as a joint stock company. The Virginia Company was formed as a profit-making venture for the purpose of colonizing the New World for England. The company sold shares to raise capital, entitling each shareholder to a proportional share of the net profits while limiting their total liability to the value of their shareholdings. The company sponsored three ships to set sail for Virginia, where they established a small colony on Jamestown Island.
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