This section is from the book "Business Finance", by William Henry Lough. Also available from Amazon: Business Finance, A Practical Study of Financial Management in Private Business Concerns.
The modern corporation did not suddenly spring into being as a device for overcoming the obstacles of previous forms of business enterprises. It has been slowly and painfully developing for centuries, and in its present form is a composite of the ideas and the experience of many different races and generations of men.
On one side, the business corporation is closely related to the municipal and religious corporation. The jurists of the early middle ages conceived - or rather adapted from Roman law - the idea of the church as a legal entity, distinct from any of its officers or ministers. It was clear that the endowments, for instance, which were given to bishops and abbots were not intended for their personal enjoyment nor to be disposed of as they saw fit. It was desirable that the funds should be entrusted to an owner that would exist year after year and generation after generation, irrespective of human frailties or vicissitudes. Out of this need for permanence and for impersonality in holding religious property, grew the perfected idea of the church itself and of other religious and charitable organizations existing as separate entities or "corporations." It was an easy step, when a similar need arose in business undertakings, to transfer this conception from religious organizations to business organizations.
During the last three centuries, the corporation has grown, both in Europe and in the United States, along parallel lines of development. The result attained is not exactly the same, for there are many technical points of difference between the German Gesellschaft mit beschrankter Haftung, the French societe anonyme, the English "joint-stock company" and the American "corporation," but these points of difference are of no great importance compared with the central fact that in all these, and in all other commercial countries as well, there has come to exist a certain type of business association, the essential features of which are:
1. Little or no direct personal relation among proprietors or between the proprietors and the business; such relations as do exist are on the impersonal basis of capital invested.
2. Control and management by elected representatives acting in trust for the proprietors.
3. Liability of proprietors limited to their investment or to some fixed amount proportioned to their investment.