The History of Small Business in the United States

A Look at American Small Business from the Colonial Era to Today

Market worker giving mother and daughter cheese sample
Market worker giving mother and daughter cheese sample. Getty Images/Hero Images

Americans have always believed that they live in a land of opportunity, where anybody who has a good idea, determination, and a willingness to work hard can start a business and prosper. It's the manifestation of the belief in a person's ability to pull themselves up by their bootstraps and the accessibility of the American Dream. In practice, this belief in entrepreneurship has taken many forms over the course of history in the United States, from the self-employed individual to the global conglomerate.

Small Business in 17th and 18th-Century America

Small businesses have been an integral part of American life and the US economy since the time of the first colonial settlers. In the 17th and 18th centuries, the public extolled the pioneer who overcame great hardships to carve a home and a way of life out of the American wilderness. During this period in American history, a majority of colonists were small farmers, making their lives on small family farms in rural areas. Families tended to produce many of their own goods from food to soap to clothing. Of the free, white men in the American colonies (who made up about one-third of the population), over 50% of them owned some land, though it was generally not much. The remaining colonist population was made up of slaves and indentured servants. 

Small Business in 19th-Century America

Then, in 19th-century America, as small agricultural enterprises rapidly spread across the vast expanse of the American frontier, the homesteading farmer embodied many of the ideals of the economic individualist.

 But as the nation's population grew and cities assumed increased economic importance, the dream of being in business for oneself in America evolved to include small merchants, independent craftsmen, and self-reliant professionals.

Small Business in 20th Century America 

The 20th century, continuing a trend that began in the latter part of the 19th century, brought an enormous leap in the scale and complexity of economic activity.

In many industries, small enterprises had trouble raising sufficient funds and operating on a scale large enough to produce most efficiently all of the goods demanded by an increasingly sophisticated and affluent population. In this environment, the modern corporation, often employing hundreds or even thousands of workers, assumed increased importance.

Small Business in America Today

Today, the American economy boasts a wide array of enterprises, ranging from one-person sole proprietorships to some of the world's largest corporations. In 1995, there were 16.4 million non-farm, sole proprietorships, 1.6 million partnerships, and 4.5 million corporations in the United States -- a total of 22.5 million independent enterprises.

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