Sealand claims to be the smallest "country" in the world. It's not even made out of land.
The Principality of Sealand is officially a "micronation", which is "an entity that resembles a nation or a state, but which for the most part exists only on paper, on the Internet, or in the mind of its creator". Sealand earns the dubious title of smallest country, with only 550 square meters of area. It's really just an old WWII anti-aircraft platform 7 miles off the English coast.
The Principality of Sealand was founded in 1976 when British Army Major Paddy Roy Bates occupied the old platform and formally declared independence. The independent status of Sealand has never been recognized by any other nation, and it has only been consistently inhabited by Bates and his family. Bates and his wife go by Prince Roy and Princess Joan.
Despite the small size of Sealand, it has gone through a civil war in 1978. It also once burned down in 2006. Also, BitTorrent site The Pirate Bay once tried to buy Sealand in 2007.
(source: 1, 2, 3, 4)