What type of company allows stockholders to invest and share in profits or losses?

A joint stock company is a business structure where multiple investors, or stockholders, can buy shares of the company. This allows them to collectively invest in the business while also sharing the risks, as well as any profits or losses, proportionally based on the number of shares they hold. This structure emerged in the late Middle Ages and became a popular method for funding ventures, such as exploration and trade, because it allowed for the pooling of capital from various investors, thereby reducing individual risk.

In contrast, a partnership typically involves two or more individuals who manage the business and share the profits. However, partners usually have unlimited liability, meaning they are personally responsible for the debts of the business. A sole proprietorship is owned and operated by a single individual who receives all profits but also bears all risks. Meanwhile, a limited liability company (LLC) combines aspects of partnerships and corporations, offering limited liability to its owners, but it does not operate on the same principles of share ownership and profit-sharing that characterize a joint stock company. Thus, the joint stock company is the only option where stockholders can invest and share in profits or losses.