European Colonization of North America

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How did joint-stock companies help the settlement of North America?

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Joint-stock companies were an essential development towards the colonization of North America by British subjects. Non-stock companies at the time were either partnerships or sole proprietor companies. From an owner perspective, these ventures could be risky because the owners could be held personally liable for the debts of the company. So, while these ventures could be lucrative as the owners retained all of the profits, they could also bankrupt and/or erase the personal fortunes of the owners.

A joint-stock company opened a less risky alternative. These companies allowed companies to raise money by selling stock to shareholders. The shareholders own the company jointly and are entitled to returns on their investment; however, the investors are only liable for their initial investment in the company. The personal fortunes of the individual investors are safe even in the event of corporate bankruptcy.

Colonization was a risky endeavor for a number of reasons. The initial chartering of ships and purchase of supplies was a large expense that could be lost due to a storm or piracy during transit. Without sufficient prior exploration (which was also a significant expense) there was a chance that the land would be incapable of supporting the colonists, in addition to the potential of hostility with Native groups. Even if the colony was successful, there was no guarantee of significant profit. This made colonization a very risky concept for normal companies because the owners would likely lose all of their accumulated wealth to debtors should the venture fail.

By using joint-stock companies, the risk of colonization was lowered financially because the owners of the company were only liable for their initial investments. This allowed ventures like the Virginia Company to form and succeed despite the high risk. The Virginia Company is a good example of these risks because it failed to turn a profit for several years, preventing the company from repaying its investors. This necessitated the distribution of land in the Virginia Colony as repayment to investors.

Joint-stock companies were necessary to mitigate the risk of establishing colonies and, once their use increased, allowed for the proliferation of colonization ventures, some of which (like the Darrien expedition) still resulted in significant losses.

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