Small Business Creation Is Booming. What’s Contributing to the Rise?

Lily Meglio’s days are busy, but she never dreads going to work.

On most days, the door to Lily’s opens at 10 a.m. Meglio, 22, straightens merchandise, places orders, and helps customers who are often surprised by her age at her colorful boutique in Clinton, Connecticut.

“I always have so much fun and I feel so creative being there,” Meglio said. “That’s huge for me.”

Last summer, her life looked different. She had just graduated from Emmanuel College in Boston with a marketing degree and was finishing submitting more than 100 job applications. Then, she asked herself a question that had been rattling around in her head for years: What if I start my own business?

Today, she has a website, storefront, and a growing following on social media. Lily’s boutique is turning a profit.

She did what many Americans are attempting to do in 2026, even as the U.S. labor market has shown some signs of picking back up. In the first half of this year, about 3.1 million Americans filed paperwork to start their own business, up nearly 17% from the about 2.6 million who filed during the same period in 2025, according to Census data.

“There are quite a few things that factor into why we’re seeing so many new formations, but it’s very, very clear this wasn’t just a blip,” said Whitney Ward, public relations director for Registered Agents Inc., a company that provides business formation services and tracks business creation. “This is a very significant and very strong trend that we are seeing month after month.”

Why Is Small Business Creation Booming?

In a year in which U.S. employers added just 181,000 jobs, according to revised Labor Department data, Meglio said the free time she had while waiting to hear back from prospective employers is what pushed her to open Lily’s.

“Even if it didn’t work out for me, and I didn’t get the loan that I had applied for, I had the time to actually look into it and put the effort in and see how far it could go,” Meglio said. “It wouldn’t surprise me if so many other people just happened to be in the same boat.”

A second reason behind the growth in business creation could be that some of the 1 in 3 Americans who took on side hustles to make ends meet as the cost of essentials rose are turning them into full-fledged businesses.

“That’s what happened to me,” said Tori Dunlap, a money expert who left her 9-to-5 three and a half years after founding Her First 100k, a financial education platform. It is now her full-time job and a multi-million dollar business. “If you’re interested in entrepreneurship, you’re interested in being your own boss, a side hustle is a great way to test that. Great way to test your own skill set. Great way to build any necessary skills that you need without asking the business to do too much for you, and also deciding if you just want this at all.”

AI: A Threat or an Assistant?

Another reason behind the growth could be workers wanting to take their fate into their own hands amid layoff anxiety – 61% of employees reported feeling it in 2025, according to a Harris Poll survey conducted for INTOO, an outplacement and career development company.

This year, more than half of Americans fear artificial intelligence could cost them or someone in their household a job, a Reuters/Ipsos poll found.

But for some small business owners, AI has turned from a threat into a helpful tool, according to Ward.

“Marketing, bookkeeping, social media – all of these things can now be helped with free AI programs that are really easy to use,” Ward said. “All of those things used to just have to be done by one person, a business owner, and it was a lot. It scared some people away, I think, and they didn’t want to bite off more than they can chew, so they just decided not to pursue their idea. But now it’s so much easier to start a business.”

A Rise in Women-Owned Businesses Contributes

The number of business applications rose gradually through the 2010s, jumped sharply in 2020 and 2021 as the COVID-19 pandemic kept people home, and has accelerated since.

Contributing to this trend is an increase in the number of women starting businesses. Between 2022 and 2025, the number of women-owned businesses rose 12.1%, from 14 to 15.7 million, according to a 2026 Wells Fargo report. It found that over the same period, the number of men-owned businesses grew 6.3%, from 19.2 to 20.4 million.

“While it’s too early to know how many of these businesses will survive in the long term, the surge suggests that the entrepreneurial spirit kindled during the pandemic is becoming a more permanent feature of the U.S. economy,” the Wells Fargo report said. “Women, in particular, were drawn to entrepreneurship as a means to gain flexibility and regain economic stability after experiencing disproportionate job losses during the pandemic.”

Dunlap, who said most of her audience is women, recently hosted a workshop titled “Quit your job in 90 days.” It aimed to teach participants how to find their “bridge business,” or something that can help them leave their 9-to-5.

“Women are just waking up to the fact that work is not built for them, especially if they’re mothers, especially if they’re caregivers, especially if they want any sort of time, freedom, and autonomy in their life,” she said. “It’s very, very hard to find that in a traditional corporate environment.”

What New Business Owners Should Know

Dunlap said the first thing she advises prospective small business owners is to identify their “ramen noodle number,” or the minimum amount they need to earn each month to make ends meet.

“If you were just eating ramen, what are your bare minimum expenses?” Dunlap said, adding a business should ideally “be making like 30% more than that because you have taxes that you have to pay and expenses.”

She said another piece of advice that sounds obvious but is an important reminder for new business owners is that they must put themselves out there.

“I don’t think people understand the amount of pitching and just being very unabashedly loud,” required, Dunlap said. “If you want your business to be successful, and you are not the loudest person in the room about it, it’s just not going to work.”

Meglio said the largest challenge she’s faced since opening Lily’s has been learning to be her employees’ boss, but she’d advise future business owners to not doubt themselves.

“If I can do it, you can do it,” Meglio said, adding it’s not easy but that, “It’s just a matter of whether or not you’re willing to put in that work, and you genuinely want to do it enough to make it happen.”

Reach Rachel Barber at [email protected], follow her on X @rachelbarber_, and subscribe to her newsletter “Making More of Your Money” here.