Did you know that colonial American farmers were some of the first sole proprietors in US? What about that Americans disliked corporations during the Gilded Age but liked them after World Word II?
You may know what a corporation search is, but you’re probably unfamiliar with the story behind the business entities you are looking up. In other words, how did the idea of a limited liability company come about? Were there sole proprietorships in colonial America? And how did Americans regard corporations after World War II?
We’ll explore these ideas as well as other important historical details concerning corporation search. You never know; you might have a greater appreciation the next time you enter the California Secretary of State business search page (or another state’s for that matter).
American Pioneers were Sole Proprietors
It’s safe to say that sole proprietorships rest on the US belief of rags to riches. Anyone with some elbow grease and a hard work ethic can create a home and livelihood for themselves and their family. This same idea that we celebrate today was just as idolized during colonial America. According to this article, “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.”
Several of these pioneers—the first colonial settlers—were some of America’s first sole proprietors, with many working as independent farmers that produced an assortment of goods: food, soap, wool, candles, you name it. (Please note, it’s likely there were other business types during this time as well.) While they may not have filed paperwork with the government (because America was still in its infancy), farmers still functioned similarly to how sole proprietorships work today. The colonial business owner (farmer) wasn’t separate from his business. If his products were not good, his reputation and personal character were at stake, meaning forget limited liability. (Personal character was important during this time since people had to rely on a smaller social circle.)
Specifically, 16.67% of the colonial population owned and worked the land. (Remember, we are talking about colonial America; free, white men made up approximately one-third of the population while the rest were slaves and indentured servants.)
Eventually though, the corporation became more highly regarded during the 20th century thanks to the Industrial Revolution and the influx of people migrating and immigrating to the cities.
Corporations were not always highly regarded
Small banks were the first American corporations, having first started up in the years after the American Revolution. Specifically, the first major corporation in America is Boston Manufacturing Co. (1813), which modeled their business after the British textile corporations. (Didn’t know American corporations were this old? Think about it the next time you’re on the Oklahoma Secretary of State page.)
Overall, the corporation business entity flourished in the US, which was surprising given it had functioned in Great Britain and the Netherlands decades before. Perhaps, this business entity suited America’s rugged individualism mentality? Or consumerism stemmed from the Industrial Revolution helped the business entity grow? Either way, corporations started to gain momentum during the 20th century (as mentioned).
However, people became concerned in the Gilded Age when there was a crackdown on corporate monopolies (i.e. railroads and oil), with the first anti-trust laws being created. It made sense that Americans became weary of these entities. Especially since the name of this time period, “Gilded Age” was coined by Mark Twain who used those words to describe a time riddled with greed and corruption.
American’s perspectives toward corporations did get better, particularly after World War II where the US was the only unharmed major power. This meant their economy was untouched and flourished out of the lack of competition.
Partnerships started in Ancient Rome
Yes, that’s right. Partnerships go as far back as Ancient Rome. And, until the 17th century, this was the only available business type of most business organizations. To put it simply; they dominated until the Industrial Revolution, in which case you saw the growing importance of corporations in the West. Interestingly enough, according to this article, “[one] of the rule[s] that had prevailed for thousands of years before 1715: partnership creditors share equally with a partner’s personal creditors in the partner’s personal assets” became applicable to American partnerships in 1978. (How about that the next time you conduct a business name search on the New York Secretary of State website.)
LLCs Didn’t Catch on Right Away
In 1977, Wyoming became the first state to make a limited liability company (LLC) a legitimate business entity option. It was later in 1982 that Florida followed suite, passing their own legislation. While an LLC did provide pass-through tax abilities and limited liability—features partnerships and corporations only partially had—it didn’t catch on right away. To put it frankly, business owners felt weary about creating an LLC because they weren’t certain how the federal government would tax them; corporation or partnership?
How LLCs Became Taxed as a Partnership
Later, in 1988, the International Revenue Service (IRS) stated that the LLC would be taxed as a partnership and not a corporation. This was because this business structure only contained two out of the four corporate attributes. While it has centralized management (headquarters) and limited liability (owner(s) and business are separate), an LLC does not have free transferability of interest (ability to sell ownership interest to another without needing permission) or continuity of existence (ability for the business to continue once the owner(s) is/are out of the picture).
You should know that now all the states and the District of Columbia have adopted the LLC business structure. And that the LLC regulations differ by state. However, most states do not limit the number of members, or restrict the specific type of LLC (i.e. individual, corporations, partnership…). Nonetheless, you should look on the state’s designated secretary of state website, such as the New York Secretary of State or Oklahoma Secretary of State, to know the specifics.
Next Time You Conduct a California Secretary of State Business Search
As we mentioned earlier, now you just might have greater admiration when you do a corporation search. For more information about the history of a corporation search, go to secstates.com. And, when it comes to conducting a business search, check out our secretary of state database for easier navigation.