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Can You Get an LLC with Felony? What You Need to Know

By Marc Guberti

Published on 28 Sep 2023 4 min read

Starting a business is exciting. You can reach new customers and develop a reliable income source. For some people, a business can be the best path forward. People convicted of felonies have fewer choices in the job market, but getting on the right track and starting a business can give you more control and expand your choices. It is possible to get an LLC even if you have a felony offense. This guide will explain the pros and cons and how the process works.

Understanding How Felons Can Form an LLC

An LLC protects your personal assets in the event your business gets involved in a legal dispute. This separation of resources is one of the many benefits of starting an LLC. You also get to capitalize on tax advantages and will look professional when potential customers discover your business.

Felons can start LLCs, but there are a few industries that are off-limits. You cannot start an LLC for a business that is related to the conviction. Beyond that, the LLC formation process is the same for individuals regardless of their criminal history.

Obstacles that Felons Could Encounter When Starting an LLC

Felons can start LLCs, but there are some obstacles you may encounter. It’s better to walk into an LLC knowing what can happen so you know how to adjust.

1. Business Activities and Licensing 

Depending on the nature of the felony conviction, the aspiring LLC owner may have restrictions for certain business activities. It can become difficult to maintain existing licenses depending on the profession. People with licenses and permits for financial services, legal healthcare, and other verticals may lose those perks or have a hard time obtaining them.

2. Financing

Financial institutions will look at a borrower’s criminal history, credit score, and other details before loaning money. While some lenders offer financing for felons, it may take longer for you to get financing for your LLC. You can improve your chances of getting a small business loan by building your credit score, growing your business, and paying off your other debt. 

Small business owners can qualify for many types of business loans. Submitting several applications and comparing your choices can help you secure more loan offers and increase the chances of getting reasonable rates. You can get SBA loans, business lines of credit, business installment loans, and other financial products. Banks, credit unions, and online lenders can all help.

3. Grants

Grants give business owners extra capital that they can use to grow and manage their businesses. While you have to pay back loans, you do not have to repay grants. This arrangement gives business owners more flexibility, but felons may have limited choices.

The pool of grants isn’t as plentiful for felons, but there are grants specifically for convicted felons. Felons aiming to start and grow LLCs may want to consider Inmates to Entrepreneurs, Small Business Development Centers, and SCORE for grants.

Why Should You Form an LLC as a Felon?

Forming an LLC as a felon is a challenge, but it is possible to establish yourself and build a business that makes a difference. These are some of the reasons you should still form an LLC.

​​1. Limited Liability Protection

An LLC protects your personal assets from legal liabilities that your business incurs. This separation limits how much you can lose if your business faces any legal issues. Only your business assets are at risk due to business activities from your LLC. Sole proprietorships do not provide this level of protection.

2. Fresh Start

Starting a business allows felons to embark on fresh starts and rebuild their lives. Businesses give people a sense of purpose, and starting your own business can also give you the cash you need to live a fulfilled life. 

3. Gain Control of Your Career 

Business owners have more flexibility and can get started with their ventures right away. Submitting job applications makes you reliant on someone else to approve your work experience. Felons can face an uphill path in landing traditional jobs, but they can start businesses right away. 

An LLC can give you more control over your career and improve your resume. You can even create jobs in your community and hire people to work for your LLC in the future.

4. Build a Positive Reputation 

An LLC can help felons repair their reputations and gain credibility within the business community. An LLC is a more professional business structure than a sole proprietorship. People may see that the felon is serious about moving away from the past and embracing a bright future. Creating an LLC can also lead to customers and partners having more trust in your business.

Can a Convicted Felon Serve as a Registered Agent for an LLC?

A convicted felon can serve as a registered agent for an LLC in most cases. You can even serve as your own registered agent. However, a convicted felon cannot become a registered agent if the conviction is directly related to fiduciary or financial matters. 

Making a Fresh Start with an LLC

An LLC can help a felon make a fresh start and create opportunities. Businesses allow people to build their income streams, gain more control over their careers, and create new jobs within the community. Each successful business starts with the right team, and doola can help. doola’s LLC formation services help business owners create, manage, and grow their LLCs. doola handles all the complex paperwork so you can focus on your business.

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