File:Ohio Company of Associates Purchase Map.jpg|
The map illustrates the first tract of Ohio land to be sold by the Continental Congress. The Ohio Company of Associates, composed of former Revolutionary War officers and soldiers, acquired the land. The company established the first permanent settlement at Marietta in April 1788. Among the Ohio Company's first directors were Rufus Putnam, Manasseh Cutler, and Winthrop Sargent.
On July 13, 1787, the Confederation Congress passed the Northwest Ordinance. The act created a system of government for the Northwest Territory. It also specified how the various parts of the Northwest Territory could become states. Earlier legislation such as the Ordinance of 1784 and the Land Ordinance of 1785, had only said that the territory would some day become states and had described how the federal government would sell the land to private citizens.
Thomas Jefferson, Nathan Dane, Manasseh Cutler, and Rufus King usually receive credit for the ideas behind the Northwest Ordinance. According to the act, the territory would have to progress through three separate stages of government. In the first stage, the Congress was responsible for selecting the territory's leaders. There would be a governor, a secretary, and three judges. The governor and judges would jointly select laws from already existing states to create their territory's legal code. The Congress reserved the right to accept or reject all selected laws. The governor would have power over the militia and Indian matters. He also could select law enforcement officials and judges for the lower courts. All five members of the territorial government were to have sizeable holdings of land and be residents of the territory.
Once five thousand free men lived within the territory, the government would enter a second stage. The federal government allowed residents to elect a legislature. The legislature consisted of two houses, a house of representatives and a legislative council. The legislative council was a group of five men selected by Congress from a list of ten names of legislators serving in the house. Every legislator serving in the house had to be an adult male resident with at least two hundred acres of property under his control. To serve on the legislative council a person had to be an adult male who owned five hundred or more acres of land. To be able to vote in the territory, a person had to be an adult male and the owner of at least fifty acres of land. No "squatters" or residents who did not own property were permitted to vote.
The final phase was actual statehood. The Northwest Ordinance stipulated the creation of at least three but not more than five states out of the Northwest Territory. Once sixty thousand people resided in a territory, they could apply for statehood. The people could form a constitutional convention, draft a state constitution, and then submit the document to the United States Congress for approval. The state constitution had to guarantee basic rights to its people, including religious freedom, trial by jury, the right to bail except in capital cases, and several additional rights. The states were to encourage education, but the Northwest Ordinance did not require states to provide public education. Slavery also was outlawed in any of the states created from the Northwest Territory.
The Northwest Ordinance paved the way for Ohio to become the seventeenth state of the United States of America. It also, with some minor modifications, established the process for admission to the United States for all states since 1787.