After resigning from the army, Burnside dedicated his efforts to developing and manufacturing his own design of a breech-loading carbine rifle. He established the Burnside Rifle Company in Bristol, Rhode Island.

After extensive testing and trials, the Burnside carbine was adopted by the US Army. This brought Burnside prestige and promised substantial financial rewards for his company.

Despite the adoption of his carbine by the army, Burnside faced significant financial difficulties. A fire destroyed a large portion of his factory, and he struggled to secure adequate funding. He was forced into bankruptcy.

After struggling with the Burnside Rifle Company, he accepted positions with the Illinois Central Railroad, under his old West Point friend George B. McClellan, and later as treasurer of that company. His experience with the railroads would become extremely important during the Civil War.