A business was usually the responsibility of one person, a proprietor, who hired others and accepted total financial responsibility if the venture went under. Partnerships were able to raise greater capital because two or more people pooled their money. The Civil War gave impetus to many new industries on a scale never before seen in America. What was needed was a new way to fund them. The corporation solved the problem.
Corporations are legal entities chartered by state governments.
To establish a corporation, money is raised from many investors. Each investor then owns shares of the company, represented by the stock certificates the corporation issues to its shareholders. If the company earns a profit, the corporation will divide its profit with its investors and pay dividends. The value of the corporation's stock will go up. But if the corporation fails, each investor will only lose what he or she invested.