Many legal and economic historians consider the development of the unincorporated company to be one of the best examples of the flexibility and adjustment of the English legal system to the changing needs of the growing and industrializing English economy. These historians, often unknowingly, join their voices to the functional paradigm of the relationship between the law and economic growth. What they are saying, in fact, is that despite a prohibitive legal doctrine, the Bubble Act, and the law of corporations in general, there was a loophole within the English legal system which made the system more instrumental to the needs of business. These historians perceive the unincorporated company to be a distinct form of business organization, based on a coherent legal concept. According to this view, the unincorporated company, which acquired almost all the characteristics and privileges of the business corporation, served as an adequate substitute for it and made possible the development of large-scale concerns at a time when incorporation by Parliament or the Court was very rare, before the mid-nineteenth-century reform in company law.

The present chapter examines this view, with an intention to refute it. I do not deny that unincorporated associations existed and played important roles in academic, professional, charitable, and other areas. However, when applied to profit-maximizing business enterprises, with freely transferable interests, liquid assets, intensive managerial tasks, and loose social and moral connections between members, the unincorporated form of business organization had many impediments.