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Can You Start A Business With A Criminal Record?

Can You Start A Business With A Criminal Record?

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Can You Start A Business With A Criminal Record?

Can you start a business with a criminal record?

Those with criminal records may struggle to start and operate a business due to the legal and financial restrictions those with prior felonies or significant misdemeanors may have accrued.

We will explore some of the nuances of this situation below, but all aspiring entrepreneurs with a criminal background should also consult an attorney for their specific needs in their local area. Other factors to consider include felony convictions versus other circumstances such as the exact type of offense or violation.

Most importantly, a criminal conviction does not prohibit you from property ownership, starting an unrestricted type of business, being a stockholder, or acquiring a property deed. 

The Types of Businesses Someone with a Criminal Record Can Start

To answer this question, first consider the types of business someone with a criminal record cannot start:

  • Most medical or adjacent professions, including those requiring licensing such as nurses, doctors, therapists, and psychologists. 
  • Financial professions requiring licensure such as financial advisor, certified accountant, insurance brokerage, and other state-regulated institutions.
  • Law practices. Some states prohibit convicted felons from starting a law practice, while other states may permit those with a criminal background to do so. 

Other professions may prohibit those with prior felonies from entering their respective fields. However, the vast majority of businesses do not require significant licensing beyond a driver’s license or state ID. 

Each state has different requirements regarding professional licensing for individuals with a criminal record. 

Related: Business licenses by state 

Some types of businesses felons and other individuals with criminal records typically start include:

  • Lawn Care: All residential and commercial property owners have a need for some level of lawn care. With some equipment purchases funded by an SBA loan or other conventional financing source, an entrepreneur with a criminal record can start earning income quickly by providing lawn care services in their local market. 
  • Cleaning Services: Some companies will take a chance on an independent contractor with a criminal background, particularly for janitorial services. However, if a particular client requires insurance or bonding, then cleaners with criminal records may face difficulties. 
  • Freelancing: Many types of skills lend themselves well to freelancing, including web development, graphic design, and other services typically provided remotely over the web. With the right skill set, this approach can help entrepreneurs with criminal backgrounds to jumpstart their businesses. 
  • Truck Company: Many states permit felons and other convicted individuals to acquire a commercial driver’s license or CDL. A CDL enables an entrepreneur to potentially start a trucking business. The exact steps for acquiring a CDL depend on the state and local municipality as well as other relevant restrictions. 
  • Food Business: Some states may not permit felons to own, operate, or manage a business that sells alcoholic beverages. However, other states may have more leniency with their policies. The restaurant business overall functions as a common way for previously incarcerated individuals to get their lives back on track, and also constitutes a viable option for entrepreneurs looking to start a business.

Each of these entrepreneurship strategies can help felons and former criminals rehabilitate their lives while avoiding the issues associated with corporate employment, including background checks 

Issues Convicted Felons May Encounter with Financing

When considering financing for their businesses, convicted felons and individuals with criminal pasts may have trouble obtaining the funding they need to start their business. While conventional lenders may look at an applicant with a criminal record, there may not be enough collateral to secure the loan and due to the borrower’s history, they may want additional guarantees that the loan will be paid off and look to the Small Business Administration (SBA).

The Small Business Administration has loan guarantee programs, however, the SBA generally excludes any business with a principal who is on probation, parole, or similar form of supervision; or who is currently facing any charges.  And while a closed criminal case is not automatically disqualifying, the SBA requires that every 7(a) applicant’s principals be “of good character,” and conducts a character evaluation for people with a felony conviction, certain misdemeanor convictions, or a recent case, requires a full FBI background check before loan funds may be approved. 

Related What is an SBA loan?

Outside of conventional loans, there are alternative forms of funding that may help, such as microloans, revolving loans, crowdfunding, or equity investors.

Business Licensing Challenges for Felons

Some major challenges with respect to licensing arise for felons looking to start a business. For example, in the state of New York, a felon may not acquire a real estate license to help buyers and sellers transact property. 

Other restrictions on licensing for felons exist in many states across broad categories of the market, including medicine, finance, accounting, legal, and more. Navigating the complex interplay of state and federal regulations may prove especially challenging for felons.

Those entrepreneurs with misdemeanor backgrounds should have an easier time acquiring the necessary licensing. However, both categories of criminal records may not have the ability to start businesses in restricted fields such as firearms, tobacco products, or alcoholic beverages. 

How Regulations Differ between States

Each state has its own regulations with respect to licensing. Some states may allow ex-offenders to work in particular fields, waive so-called “good character” requirements, or petition for a certificate of relief. 

Other states may prohibit those with prior convictions for serious felonies such as violent crimes from acquiring most types of licenses. A local attorney in your area will have the ability to guide you through this process.

Felon-Owned Businesses Q&A

Some of the more common questions we receive on felon-owned businesses include:

Can a Felon Have an LLC?

Yes, a felon may register an LLC or other type of corporation subject to the same requirements as any other entrepreneur.

How Long Do Felonies Remain on Public Criminal Records?

Felonies remain on an individual’s criminal record for life unless expunged by the court. A licensing board at the state level will often take into account all prior felonies. 

Are There Any Laws Prohibiting Felons from Operating Businesses?

Yes, certain types of state and federal laws may prohibit felons from operating a business in certain types of fields, including hazardous materials, firearms, and financial-oriented professions. For would-be entrepreneurs with a criminal background, other types of fields may offer more opportunities for self-employment and business ownership. 

Next Steps

For an entrepreneur with a criminal background, several types of fields offer great opportunities to start a business, including: 

  • Roofing and other roof-related services, including installation and repair.
  • Handyman services such as siding repair, home remodeling, house painting, and masonry services. 
  • Landscaping and snow removal services as indicated previously. 
  • Repair services such as appliance repairs. 
  • And many more that do not require a state license. 

Ultimately, a business owner with a criminal background should closely investigate fields which do not have professional licensing requirements and for which there exists no need for substantial conventional debt funding, such as those businesses which do not require large amounts of upfront business loans for capital expenditures or the need to lease restricted equipment.  

Can You Start A Business With A Criminal Record?

Can You Start A Business With A Criminal Record?

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