Did you make a big mistake in your past that haunts you to this day? Getting a job with a criminal record can be a serious challenge, which is why more and more ex-cons are looking to the world of self-employment as an opportunity to build an income, or build a lifestyle with more freedom than a traditional day job. If you have a criminal record and want to start a business, follow along with this guide to get the ball rolling.
Consider Industry Licensing Requirements
Step one in starting a business with a criminal record is to understand what businesses you can’t start. A convicted felon is not allowed to hold certain positions. Most noteworthy in that is is anything having to do with medicine, law, finance, or dangerous materials. Even if your past conviction had nothing to do with those areas, they are off limits for felons. This law is designed to protect people from the bad apples out there who get out of prison and would offend again.
These specific professions make up just a small slice of the potential for businesses you can start. Just because you can’t become a doctor, lawyer or financial advisor doesn’t mean you can’t start a successful business with a criminal record. Once you know what you can’t do, focus on what you can do. There is a wide array of possible ways to earn a living while self-employed. For most of them, a criminal record has no bearing on starting or operating the business.
Also remember that some businesses require special licenses. Check with your state if you may need one and qualify with your criminal record before moving on to the next step.
Starting a Business Is Easy
The act of starting a business is easy, and there is no reason someone with a criminal record can’t create a new business with their state. Registering a business is the easy part of starting a business, of course, but virtually anyone can go to their state’s secretary of state website to create a new business entity. Depending on your state, the registration fees could be as low as around $10 or over $800. Look up your state’s requirements before you start the application process.
When registering, don’t forget that starting a business is not synonymous with starting a successful business. You can hire a lawyer to file your business paperwork for you, or you can take care of it yourself. For simple businesses like a single member LLC, save the money and fill out your own form. It takes about five minutes in total, and you are up and running with your brand new business.
Considering a Partner & Other Business Structures
The difficult part of running a business with a criminal conviction in your past is finding outside funding for your business. If you have a wealthy family that doesn’t mind bankrolling your operations, you are in great shape. That is how Portland based, nationally distributed Dave’s Killer Bread came to life.
But if you don’t have a family ready to hand over everything you need, you may have to find funding. That could mean a loan, credit cards, or even a business grant. We will go over a couple of options in a moment, but if you find yourself struggling, there are a few more options to consider.
One is to start your business with one or more partners who do not have criminal records. Even if you don’t qualify for a loan, your business partner might. This isn’t for everyone, but it can work well, particularly if you already have a co-owner or partner in mind.
Another possibility is to create your business as a corporation, like an S-Corp or a C-Corp, where you have a bigger corporate veil between you and the business. In some cases, a lender may be willing to hand over money to a business entity that wouldn’t lend directly to the founder. Corporations are more expensive to start and have bigger legal requirement than an LLC, so you may want to discuss this with a lawyer or accountant, or both, before starting.
Loans for Felons
Getting a loan is harder for someone with a criminal record, as background checks might screen you out of landing your funds. But there are some small business loans for felons you may qualify for.
The first place to look is the government’s Small Business Administration, as SBA loans do not specifically screen out felons, though anyone with a history of financial crimes or anything that involves dishonesty may be denied. Because these loans are backed by the government, not the bank’s own funds, banks are more willing to lend to a felon through the SBA program.
Thinking outside the box, you may also be able to raise the funds you need via Kickstarter or GoFundMe. That only works, however, if your business resonates well with those audiences.
Grants for Felons
There are some limited programs out there for former criminals to get access to money for a business with no repayment requirement. Of course, grants for felons are not without any strings attached. But they do give another route to get started.
Start by talking to leaders at your past correctional facility or your local community. A religious leader, community official, or other knowledgeable person may know of local programs to help you start a new business.
Also check out these programs, which each offer potential access to help funding your business, or at least guidance in getting started with your unique background:
Be Mindful of Your Rights
Starting any new business is an uphill battle, but even more so with a misdemeanor or felony conviction on your record. But if you can handle the extra work to get funding, if needed, you may be able to overcome the challenges and get on a path to a new, prosperous life.
When in doubt, get help from an attorney or legal professional in your area who knows local laws regarding business licenses for convicted criminals. If you are willing to work hard and overcome a little adversity, there is no reason you can start a business with a criminal record.
This article was originally written on March 12, 2018 and updated on February 8, 2023.