Can a felon get a business license?

Yes, for most types of businesses. A general business license, sales tax permit, or home occupation permit does not require a background check in the vast majority of jurisdictions. The exceptions are industry-specific licenses (liquor, firearms, gaming, childcare, cannabis, financial services) where background checks are required and felonies may disqualify you.

Can a felon get an SBA loan?

Yes. The SBA removed criminal record restrictions from its 7(a), Microloan, 504, and Community Advantage loan programs in 2023. A felony conviction no longer automatically disqualifies you from SBA-backed loans. Individual lenders still evaluate your creditworthiness, business plan, and ability to repay, but the criminal record barrier has been eliminated at the SBA level.

What businesses can a felon NOT start?

The main restricted industries are: firearms sales (federal law prohibits felons from holding an FFL), certain financial services (FINRA/SEC can deny registration), liquor sales (most states conduct background checks), gaming/casinos, childcare facilities, and some healthcare businesses requiring DEA registration. However, the vast majority of business types — retail, services, food, construction, technology, e-commerce, consulting — have no criminal record restrictions.

Can a felon get bonded for a business?

Getting a surety bond with a felony can be challenging through traditional bonding companies. However, the Federal Bonding Program provides FREE fidelity bonds to justice-impacted individuals, covering the first six months of employment or business operation. After building a track record, specialty bonding companies may offer ongoing coverage. Contact your state's bonding coordinator through the Department of Labor.

Are there special tax considerations for felons starting a business?

No — the tax rules are exactly the same for everyone regardless of criminal history. You report business income on Schedule C (sole proprietorship) or your LLC/corporate tax return. You can deduct all legitimate business expenses. The IRS does not ask about or consider criminal history. If you have outstanding tax debt or unfiled returns, resolve those issues first to avoid complications.

Can a felon be an independent contractor?

Yes. Working as an independent contractor (1099 worker) is essentially running your own business. You can freelance, do gig work, or contract with companies without any criminal record restrictions from the IRS or federal government. Some companies that hire contractors may conduct background checks, but many do not, and you can also find your own clients directly.

Are there franchise opportunities for felons?

Yes. Most franchise companies do not have blanket policies against franchisees with criminal records. Each franchisor evaluates applicants individually. Some lower-cost franchises (cleaning services, lawn care, mobile repair) are particularly accessible because they require less capital. Contact franchise companies directly to discuss your situation — many are more flexible than you might expect.

Can a felon get a commercial lease?

Yes. Commercial landlords are generally more focused on your business plan, financial ability to pay rent, and creditworthiness than on criminal history. Unlike residential leases, commercial leases rarely involve criminal background checks. If you do encounter a landlord who checks, consider shared office spaces, co-working spaces, or home-based businesses as alternatives while building your track record.

Does a felony affect business insurance?

It can, but it doesn't prevent you from getting coverage. Some insurance companies may charge higher premiums or require additional information about your conviction. General liability insurance, property insurance, and professional liability insurance are all available to business owners with criminal records. Shop around — rates and policies vary significantly between insurers. An insurance broker can help find the best options.

Can a Felon Own a Business?

Last updated: 2026-04-01

YES — there is NO background check required to start a business in the United States. You can form an LLC, sole proprietorship, or corporation with a felony conviction. The RAND Corporation found that approximately 3.8% of US business owners have criminal records (~1.5% with felonies, equaling over 1 million businesses). The main restrictions are in industries requiring special licenses: liquor, firearms, cannabis, finance, gaming, childcare, and healthcare. The SBA removed criminal record restrictions from 7(a), Microloan, 504, and Community Advantage loan programs in 2023. The New Start Act of 2025 (Senators Markey and Booker) proposes $100K-$500K grants for justice-impacted entrepreneurs.

You CAN do this with a felony...

✓Start any unregulated business (retail, services, construction, food truck, cleaning, landscaping, etc.)
✓Form an LLC or corporation in any state
✓Get an EIN (Employer Identification Number) from the IRS
✓Open a business bank account (most banks)
✓Apply for SBA loans (7(a), Microloan, 504, Community Advantage — criminal record restrictions removed in 2023)
✓Work as an independent contractor or freelancer
✓Start an e-commerce or online business

Restricted or prohibited...

✗Federal firearms dealer license (FFL)
Anyone convicted of a felony is prohibited from possessing firearms under federal law, which means you cannot obtain a Federal Firearms License to sell guns. This applies to all felonies, not just violent ones. (18 U.S.C. § 922(g))
✗Certain financial industry licenses (FINRA, SEC)
The Financial Industry Regulatory Authority (FINRA) and Securities and Exchange Commission (SEC) can deny broker-dealer registration and investment advisor licenses based on felony convictions, particularly for fraud, theft, or financial crimes. (Securities Exchange Act § 15(b)(4))
✗Liquor license in many states
Most states conduct criminal background checks for liquor license applicants. Felony convictions, especially drug-related or alcohol-related offenses, frequently result in denial. Some states have absolute bars, while others evaluate on a case-by-case basis. (Varies by state — state alcohol control boards)
✗Gaming or casino license
Gaming commissions in every state with legalized gambling conduct extensive background investigations. Any felony conviction is typically disqualifying, and even misdemeanors involving dishonesty or theft may result in denial. (State gaming commission regulations)
✗Childcare facility license in most states
Most states prohibit individuals with felony convictions — particularly sex offenses, violent crimes, or offenses against children — from owning or operating licensed childcare facilities. Some states have absolute bars; others allow petition after a waiting period. (State childcare licensing statutes)
✗Some cannabis licenses, ironically
Despite cannabis legalization, many states still disqualify applicants with drug-related felonies from obtaining cannabis business licenses. However, a growing number of states have social equity programs that specifically prioritize justice-impacted individuals. (Varies by state — state cannabis control boards)

Gray areas — it depends

Liquor license (varies by state)

Some states have absolute bans on felons holding liquor licenses, while others evaluate each application individually based on the nature of the offense, time elapsed, and evidence of rehabilitation. States like California, New York, and Texas allow case-by-case review. Research your specific state's Alcohol Beverage Control (ABC) board requirements.

Cannabis license (varies — some states have social equity programs)

The landscape is rapidly changing. States like Illinois, New York, New Jersey, and Connecticut have social equity programs that actually give priority to applicants with cannabis-related convictions. Other states still bar anyone with drug felonies. Check your state's cannabis regulatory authority for current rules.

Professional services requiring a license (accounting, real estate, etc.)

Many professional licenses (real estate agent, CPA, insurance agent, barber, cosmetologist) require background checks. Whether a felony disqualifies you depends on the state, the profession, and the nature of the conviction. Many states have passed 'fair chance licensing' laws that limit the use of criminal records in licensing decisions.

Government contracting

Federal government contracts do not automatically exclude businesses owned by people with criminal records. However, some contracts require security clearances or bonding, which may be difficult to obtain with a felony. The SBA's 8(a) program for disadvantaged small businesses does not have criminal record restrictions.

Bonding requirements

Some businesses (construction, janitorial, security) require surety bonds. Getting bonded with a felony can be difficult because bonding companies assess risk based on criminal history. Options include: Federal Bonding Program (free fidelity bonds for justice-impacted individuals), specialty bonding companies, and building a track record to improve eligibility over time.

How to Start a Business — Step by Step

Choose your business structure

Decide between a sole proprietorship (simplest, no state filing needed), LLC (liability protection, moderate cost), or corporation (most complex, best for investors). An LLC is recommended for most first-time entrepreneurs — it separates personal and business liability. No background check is required for any structure.

Register with your state

File formation documents with your state's Secretary of State office. For an LLC, this is typically called 'Articles of Organization.' For a corporation, 'Articles of Incorporation.' Sole proprietorships may only need a DBA ('Doing Business As') filing. Costs range from $50-$500 depending on the state. No criminal background check is conducted.

Get an EIN from the IRS

Apply for a free Employer Identification Number (EIN) at IRS.gov. This is your business's tax ID number. The application takes about 5 minutes online, and you receive your EIN immediately. No background check — the IRS does not ask about criminal history on the EIN application.

Open a business bank account

Bring your EIN, formation documents, and government-issued ID to a bank. Most banks will open a business account for you regardless of criminal history. If you're denied at one bank, try credit unions or online banks like Mercury, Novo, or Bluevine, which tend to be more flexible.

Get necessary licenses and permits

Check your city, county, and state requirements. Most business licenses (general business license, sales tax permit, home occupation permit) do NOT require background checks. If your industry requires a special license (liquor, healthcare, etc.), research the specific requirements for your state before investing time and money.

Explore funding options

Apply for SBA loans (no criminal record restriction since 2023), Kiva microloans (0% interest, no background check), or CDFI loans. Contact SCORE for free mentoring. Look into Inmates to Entrepreneurs for training and pitch competitions. Start with what you can afford and grow organically.

Launch your business

Start generating revenue. Focus on building a track record of income and positive reviews. Register for relevant online platforms (Google Business Profile, social media, industry-specific directories). Consider starting as a sole proprietor or freelancer to test your idea before investing in an LLC or formal structure.

Funding Sources for Justice-Impacted Entrepreneurs

Source	Description	Felony Restriction
SBA 7(a) Loans	The most common SBA loan, up to $5 million. The SBA removed criminal record restrictions in 2023, so felony convictions no longer automatically disqualify applicants. Lenders still evaluate creditworthiness individually.	No restriction since 2023
SBA Microloans	Loans up to $50,000 through nonprofit intermediary lenders. Designed for small businesses and startups. Criminal record restrictions were removed alongside the 7(a) program changes in 2023.	No restriction since 2023
CDFIs (Community Development Financial Institutions)	Mission-driven lenders focused on underserved communities. CDFIs are often more flexible than traditional banks and many specifically serve justice-impacted entrepreneurs. Over 1,300 certified CDFIs operate across the U.S.	Generally no restriction — evaluated individually
Kiva Microloans	0% interest crowdfunded loans up to $15,000. No credit score minimum, no fees. Kiva does not conduct criminal background checks and has funded thousands of justice-impacted entrepreneurs.	No restriction
Grameen America	Microloans for women entrepreneurs in low-income communities. Loans start at $2,000 and grow with the borrower. Available in major metro areas. No criminal background check required.	No restriction
Inmates to Entrepreneurs	Free entrepreneurship training program specifically for people with criminal records. Offers courses, mentoring, and pitch competitions with seed funding. Operates in-person in several states and online nationally.	Designed for justice-impacted individuals
SCORE Mentoring	Free mentoring from experienced business professionals through the SBA's SCORE program. Over 10,000 volunteer mentors nationwide. No background check — anyone can access free business mentoring and workshops.	No restriction
State-Specific Programs	Many states offer grants, loans, and training specifically for justice-impacted entrepreneurs. Examples include California's CROP program, New York's Center for Employment Opportunities, and Texas's reentry entrepreneurship initiatives.	Varies by state — many specifically target justice-impacted individuals
Crowdfunding (GoFundMe, Kickstarter, Indiegogo)	Crowdfunding platforms do not conduct criminal background checks on campaign creators. You can raise startup capital directly from supporters. Product-based businesses work especially well on Kickstarter and Indiegogo.	No restriction
Personal Savings / Bootstrapping	Many successful businesses started with personal savings and sweat equity. No background checks, no applications, full control. Consider starting small with a service-based business that requires minimal upfront investment.	No restriction

Restricted Industries — Detailed Breakdown

Industry	Restriction	Workaround
Firearms Sales	Federal law prohibits felons from obtaining an FFL (Federal Firearms License)	None — this is a hard federal bar under 18 U.S.C. § 922(g). The only remedy is a presidential pardon or gubernatorial restoration of rights (in some states).
Financial Services (Broker-Dealer, Investment Advisor)	FINRA/SEC can deny registration based on felony convictions	Apply for a statutory disqualification waiver through FINRA. Success depends on the nature of the offense, time elapsed, and evidence of rehabilitation.
Liquor / Alcohol Sales	Most states require background checks for liquor licenses; felonies often disqualify	In states with case-by-case review, demonstrate rehabilitation and time elapsed. Alternatively, have a partner without a record hold the license (check state rules on this). Some states allow petition after a waiting period.
Gaming / Casinos	State gaming commissions typically disqualify anyone with a felony	Very limited. Some states allow petition after a long waiting period (10-15 years). Consider adjacent businesses (restaurants near casinos, entertainment venues) that don't require a gaming license.
Childcare / Daycare	Most states bar felons from owning licensed childcare facilities	Some states allow petition after a waiting period, especially for non-violent offenses. Consider unlicensed childcare alternatives where legally permitted (varies by state) or adjacent services like tutoring or youth mentoring programs.
Cannabis	Many states still bar applicants with drug felonies from cannabis licenses	Apply in states with social equity programs (Illinois, New York, New Jersey, Connecticut) that prioritize justice-impacted applicants. Some programs specifically reserve licenses for people with cannabis-related convictions.
Healthcare (Pharmacy, Home Health Agency)	DEA registration and state health department licenses may be denied based on felonies	Non-clinical healthcare businesses (medical billing, health tech, wellness coaching) typically don't require DEA or clinical licenses. Focus on business models that don't require controlled substance access.
Security Services	Most states prohibit felons from owning or working in private security	Some states allow petition after a waiting period. Consider technology-based security solutions (cameras, alarms, cybersecurity) that may not require a security guard license.
Insurance	State insurance departments can deny licenses based on felonies, especially for fraud-related convictions	Apply for a waiver or consent order from the state insurance commissioner. Non-fraud convictions and significant time elapsed improve chances. Some states have enacted fair chance licensing laws that apply to insurance.
Real Estate (Brokerage)	State real estate commissions may deny broker licenses based on felony convictions	Many states now have fair chance licensing laws. Start as a licensed salesperson (easier to obtain) before pursuing a broker license. Some states allow application after a waiting period with evidence of rehabilitation.
Transportation (Trucking Company with CDL Drivers)	CDL drivers face restrictions for certain convictions; company owners hiring CDL drivers must comply with FMCSA regulations	You can own a trucking company without personally driving. Hire qualified CDL drivers and focus on the business management side. Owner-operators with clean driving records can still obtain CDLs in many cases.
Government Contracting	Some contracts require security clearances or bonding that may be difficult with a felony	Start with contracts that don't require security clearances. Use the Federal Bonding Program for fidelity bonds. Apply for SBA 8(a) certification for disadvantaged businesses (no criminal record bar).

Frequently Asked Questions

Can a felon own a business?: Yes. There is no federal or state law that prohibits someone with a felony conviction from owning a business. You can form an LLC, sole proprietorship, or corporation regardless of your criminal record. The RAND Corporation found that approximately 3.8% of all U.S. business owners have criminal records, including over 1 million businesses owned by people with felony convictions.
Can a felon get a business license?: Yes, for most types of businesses. A general business license, sales tax permit, or home occupation permit does not require a background check in the vast majority of jurisdictions. The exceptions are industry-specific licenses (liquor, firearms, gaming, childcare, cannabis, financial services) where background checks are required and felonies may disqualify you.
Can a felon get an SBA loan?: Yes. The SBA removed criminal record restrictions from its 7(a), Microloan, 504, and Community Advantage loan programs in 2023. A felony conviction no longer automatically disqualifies you from SBA-backed loans. Individual lenders still evaluate your creditworthiness, business plan, and ability to repay, but the criminal record barrier has been eliminated at the SBA level.
What businesses can a felon NOT start?: The main restricted industries are: firearms sales (federal law prohibits felons from holding an FFL), certain financial services (FINRA/SEC can deny registration), liquor sales (most states conduct background checks), gaming/casinos, childcare facilities, and some healthcare businesses requiring DEA registration. However, the vast majority of business types — retail, services, food, construction, technology, e-commerce, consulting — have no criminal record restrictions.
Can a felon get bonded for a business?: Getting a surety bond with a felony can be challenging through traditional bonding companies. However, the Federal Bonding Program provides FREE fidelity bonds to justice-impacted individuals, covering the first six months of employment or business operation. After building a track record, specialty bonding companies may offer ongoing coverage. Contact your state's bonding coordinator through the Department of Labor.
Are there special tax considerations for felons starting a business?: No — the tax rules are exactly the same for everyone regardless of criminal history. You report business income on Schedule C (sole proprietorship) or your LLC/corporate tax return. You can deduct all legitimate business expenses. The IRS does not ask about or consider criminal history. If you have outstanding tax debt or unfiled returns, resolve those issues first to avoid complications.
Can a felon be an independent contractor?: Yes. Working as an independent contractor (1099 worker) is essentially running your own business. You can freelance, do gig work, or contract with companies without any criminal record restrictions from the IRS or federal government. Some companies that hire contractors may conduct background checks, but many do not, and you can also find your own clients directly.
Are there franchise opportunities for felons?: Yes. Most franchise companies do not have blanket policies against franchisees with criminal records. Each franchisor evaluates applicants individually. Some lower-cost franchises (cleaning services, lawn care, mobile repair) are particularly accessible because they require less capital. Contact franchise companies directly to discuss your situation — many are more flexible than you might expect.
Can a felon get a commercial lease?: Yes. Commercial landlords are generally more focused on your business plan, financial ability to pay rent, and creditworthiness than on criminal history. Unlike residential leases, commercial leases rarely involve criminal background checks. If you do encounter a landlord who checks, consider shared office spaces, co-working spaces, or home-based businesses as alternatives while building your track record.
Does a felony affect business insurance?: It can, but it doesn't prevent you from getting coverage. Some insurance companies may charge higher premiums or require additional information about your conviction. General liability insurance, property insurance, and professional liability insurance are all available to business owners with criminal records. Shop around — rates and policies vary significantly between insurers. An insurance broker can help find the best options.

Take Action — Direct Links

SBA.gov — Start your business
Official SBA guide to starting a business, including registration, funding, and licenses
SCORE.org — Free business mentoring
Free mentoring from experienced business professionals — no background check required
Inmates to Entrepreneurs — Free training for justice-impacted
Free entrepreneurship courses, mentoring, and pitch competitions for people with criminal records
Kiva.org — 0% interest microloans
Crowdfunded microloans up to $15,000 with no interest, no fees, and no background check
State business registration (find your state)
Links to every state's Secretary of State office for business registration
IRS — Apply for an EIN online (free)
Get your business tax ID number in about 5 minutes — completely free, no background check

Disclaimer: This is informational only, not legal advice. Business licensing requirements and funding programs change frequently. Consult the U.S. Small Business Administration or a qualified attorney for advice about your specific situation.