Loading the player...

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.

The shares of a joint stock company are transferable, so for a public joint stock company, the shares may be traded on a registered exchange, but for a private joint stock company, they are transferable between private parties.

BREAKING DOWN '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.

The original mission for the colony was to recover what were thought to be large gold and mineral reserves throughout the region. When it was discovered there was no gold to be found, the settlers directed their efforts to other natural resources in attempt to generate profits. Extremely cold winters, poor food and water supplies, sickness, internal strife and Indian assaults kept the settlers in survival mode, which detracted from their financial responsibilities to the company. After several attempts over several years to salvage the mission, which included massive publicity campaigns to attract new investors, the company was unable to stabilize the colony enough to make it financially successful. Investors never realized any profits. However, the mission went far enough to establish Virginia as a colony of England, which laid the foundation for its expansion into the New World.

  1. Joint

    A legal term describing a transaction or agreement where two ...
  2. Joint Liability

    An obligation, including an obligation to repay a debt between ...
  3. Strategic Joint Venture

    A strategic joint venture is a business agreement between two ...
  4. Unlimited Liability

    An unlimited liability is a type of business where owners share ...
  5. Limited Liability

    A type of liability that does not exceed the amount invested ...
  6. Joint Return

    A joint return is a U.S. income tax return that reports the combined ...
Related Articles
  1. Investing

    2 Undervalued REITs To Add to Your Portfolio (AHP, CLNY)

    These two real estate bargains may offer potentially high total returns.
  2. Personal Finance

    Should You Open A Joint Bank Account?

    Joint finances may not be romantic, but it's an issue that serious long-term couples will have to confront at some point.
  3. Investing

    Reviewing Liabilities On The Balance Sheet

    As an experienced or new analyst, liabilities tell a deep story of how a company finances, plans and accounts for money it will need to pay at a future date.
  4. Investing

    Why Do Companies Care About Their Stock Prices?

    Find out how a company's stock price reflects its value to internal and external shareholders.
  5. Personal Finance

    Togetherness or Trouble? Simple’s New Shared Bank Account

    A new type of online joint account lets couples and other duos share their financial lives – as little or as much as they want.
  6. Managing Wealth

    Know Your Shareholder Rights

    Common-stock owners have numerous privileges and should be vigilant in monitoring a company.
  7. Personal Finance

    How To Improve Net Worth By Decreasing Liabilities

    Here's an analysis of how to adjust liabilities and assets to improve net worth.
  8. Investing

    Amendment Creates Colony NorthStar (NSAM, NRF)

    With the three-company merger expected to close in January 2017, newly-formed Colony NorthStar will be guided by a new, smaller board.
  9. Investing

    How to Analyze a Company's Financial Position

    Find out how to calculate important ratios and compare them to market value.
  1. What are the primary advantages of forming a joint venture?

    Learn how the advantages of a joint venture make this business strategy a good alternative to mergers and acquisitions for ... Read Answer >>
  2. How are joint ventures regulated in the United States?

    Learn how joint ventures are governed in the United States, and discover why tort law is so important for upholding the contracts ... Read Answer >>
  3. How did mercantilism affect the colonies of Great Britain?

    Read about the effects of British mercantilism on the economy and well-being of its imperial colonies, especially the American ... Read Answer >>
  4. What are the types of share capital?

    Companies obtain share capital by selling ownership shares to the public. The two types of share capital are common stock and preferred ... Read Answer >>
  5. What advantages do corporations have over privately held companies?

    Learn about the chief advantages that publicly traded corporations have over other forms of business organizations, most ... Read Answer >>
Hot Definitions
  1. Liquidity

    Liquidity is the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's ...
  2. Federal Funds Rate

    The federal funds rate is the interest rate at which a depository institution lends funds maintained at the Federal Reserve ...
  3. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  4. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  5. Entrepreneur

    An entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture.
  6. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
Trading Center