A Guide to the GRE/Miscellaneous Passages

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Miscellaneous Passages[edit]

The GRE will also throw in more unusual topics on occasion.

          By the late 1800s, the concept of a
        “corporation” - a legal entity separate and
        distinct from its stockholders - was firmly
        entrenched in Anglo-American law.  
5       However, its use and creation had a
        remarkably different context.  The first
        corporations had been royal “charters” of
        the British Crown, such as the British East
        India Company or the Hudson's Bay 
10      Company, and were used to exploit
        exclusive territorial and trading rights
        secured through English global imperialism.
        This model, while highly effective for
        managing global trade, was far less
15      applicable in the United States, which for
        the brunt of the 1800s was focused on
        pushing westward within its own
        borders.  Accordingly, the “charter” -  
        which typically would require a 
20      government enactment - was of little help.
        Instead, various states, beginning with
        New Jersey, began a new trend of the
        “enabling” corporate statute, under which
        any citizen could create a corporation to 
25      manage private business affairs.  By the
        20th century, most states of the United
        States as well as nations worldwide had
        created some type of “enabling” statute,
        allowing private individuals to form 
30      corporations to manage their mutual

1. How did the corporation originate?

2. How was the corporation as allowed by law in the United States, beginning in New Jersey, different from the original corporation used by the British?

3. What differences between Britain and the United States prompted this difference and change in the nature of a corporation?


Answers to Practice Questions[edit]

1. According to the passage, corporations originated as royal charters by the British Crown to manage economic affairs in various parts of the world. This is explained on lines 6-12, which give examples of the Hudson's Bay Company and the British East India Company.

2. New Jersey's law allowed corporations to be created voluntarily by individuals, as opposed to formed by an act of the government. It thus differed from traditional English law in this regard.

3. As explained in lines 13-20, the economic expansion of the United States was primarily domestic, and thus the British model was of little use to Americans, who sought to have business entities to regulate things internally. Accordingly, the corporation which evolved under American law was one which private individuals could form to manage their affairs, with the permission and protection of the state.