For people who have been judicially impacted—e.g., anyone who’s been arrested, convicted but not incarcerated, charged but not convicted, or incarcerated—starting a business presents challenges. Even if found innocent, an arrest can affect a customer’s decision to patronize a business. Felon entrepreneurs face additional challenges, including not being able to rent a commercial space for their business and not being able to get start-up financing.
More Americans face these challenges than many expect. The United States incarcerates more people per capita than any other other nation in the world at a rate of 565 per 100,000 residents. The criminal justice system involves thousands of federal, state, local and tribal systems. In total, these systems hold almost 2 million people a year, according to the Prison Policy Initiative.
These statistics include people who were arrested and made bail, remained behind bars until trial or were convicted and sentenced to jail or prison time. This number also includes a large number of people who recidivated after previous convictions, which can be caused by events such as checking in late with a parole officer or failing to land a steady job.
Can I start a business as an ex-convict?
Yes. There are no laws against an ex-convict owning a business and starting an LLC. In most cases, a convicted felon can serve as a registered agent of an LLC, except if the conviction is related to fiduciary or financial matters.
If you’re a justice-impacted individual, here are nine steps recommended by business experts and returned citizens to follow when starting a business.
1. Get the right mindset
Returned citizens who are entrepreneurs and business coaches agree: Not much can happen until an incarcerated individual decides to change their life.
Tim Hamilton, chief administrative officer of Texas-based Prison Entrepreneurship Program (PEP), says that before the nonprofit organization starts teaching any business basics, it focuses on character. With values such as accountability, integrity, execution, excellence and a servant-leader mentality, the organization helps participants start changing their mental approach.
One of the first tasks Prison Entrepreneurship Program participants are asked to do is to write their eulogies. “What do you want people to say about you?,” Hamilton asks. “This is the time to start building that legacy. There have been mistakes in the past but look forward. What do you want to do and how do we get there?”
At the end of its program PEP hosts a ceremony where graduates receive a certificate in entrepreneurship from Baylor University’s Hankamer School of Business. They can invite friends and family to attend. It’s an opportunity—in some cases, the first opportunity, Hamilton says—for families to see an incarcerated individual succeeding. This event also creates an important mindset shift in the graduates’ belief in themselves, one the program hopes will serve them well upon their release.
2. Be a part of your community and find mentors
PEP has seen the value of keeping incarcerated individuals and returned citizens in the community because they hold each other accountable. PEP houses program participants with each other within prisons and provides transitional housing for them upon their release; it also encourages them to continue connecting with program volunteers, participants and mentors.
Roderick Hearn, founder of Houston, Texas,-based Iron Rod Steel and winner of PEP’s annual Barbed Wire to Business pitch competition, didn’t complete the program while incarcerated but was grafted in post release. He’s found his PEP connections invaluable. “Just having a group of people here who know you, and who believe in you. I think so many people start off in their entrepreneurial journey, and they don’t even have that. They have nothing but naysayers. Nothing but doubters. And they probably feel like they’re in it just completely by themselves,” he says. “The fact that we have this community of people that we can go to, and we know their whole purpose is to see us succeed? That’s huge. And it does kind of keep a fire lit under you.” In 2023, his business had 10 employees, topping $2 million in sales via steel distribution and manufacturing of security gates.
3. Learn about your field
While in prison, Hearn learned welding. The prison vocational program allowed him to earn an associate degree and get on-the-job training at the correctional facility’s stainless steel plant. But his desire to learn didn’t stop there. “I started to just devour anything, any literature I could get on success,” he recalls.
Upon his release, he landed a job as a welder’s helper but picked up side jobs to keep learning through trial and error.
4. Set goals and avoid the naysayers
Hearn says while he was in prison, he felt everyone was disappointed in him. Upon his release, “I was determined to prove to myself and to the world that I wasn’t done. And that, that I wasn’t a complete abject failure,” he says. “I worked hard to prepare myself to get out and sort of make waves. You know, I had it on my mind. I’m gonna get out. I’m going to prove to everybody what I’m really worth and show everybody the value that I have.”
When he was released, he had a whiteboard in his apartment to track success metrics he set for himself. But he says consistency is more important than accomplishing the goals. “Just be consistent with what you’re doing. And, you know, just take things step by step,” he says. “While you’re working toward those goals, try to continue to improve, continue to learn, optimize, systematize.”
Entrepreneurship inherently comes with cynics, and that’s even more true for people who have been judicially impacted. “Be discerning about who you listen to. There are people who will tell you all kinds of nasty stuff [because you’ve been incarcerated], and it’s usually the people who are supposed to love you the most,” says Josh Nowack, founder of Breaking Free Industries and a board member for business skills nonprofit Inmates to Entrepreneurs. “Follow your own beacon, your own pathway.”
5. Name your business independently
Business instructors with Inmates to Entrepreneurs, a North Carolina-based nonprofit that teaches incarcerated individuals and returned citizens how to start businesses, and Prison Entrepreneurship Program instruct returned citizens not to name their businesses after themselves.
In the digital age, internet searches of someone’s name can quickly reveal a mug shot or a media article about someone’s conviction. Naming the business independently allows returned citizens to distance themselves from their judicial backgrounds.
6. Decide how to tell your story
Justice-impacted entrepreneurs face a dilemma in addressing their pasts. Some hope to distance themselves from their convictions and not bring them up, while others believe that embracing their second-chance stories is key to gaining customers and marketing their businesses. Deciding which is best depends on the individual and their field of work.
Claudia Shivers, founder of Queen Coffee Bean and an Inmates to Entrepreneurs board member, felt she had little choice. “My case was, like, on the front page of the newspaper, so I’ve just led with that,” she says.
Nowack has also woven this part of his history into his business, particularly because he employs other returned citizens. Buying a T-shirt from Breaking Free Industries also means supporting second chances for its founder and employees.
However, Lawrence Carpenter, fellow Inmates to Entrepreneurs board member, hasn’t been as forthcoming with his story. His commercial cleaning business involves government, and sometimes school, contracts. He prefers waiting until people are familiar with his work ethic and character before introducing the subject; however, he’s always honest about his background if asked.
7. Be passionate
“People buy passion,” Nowack says. “If you come off by saying, ‘I’m going to be the most passionate person about cleaning toilets you’ve ever seen in your life,’ you will get business because you’re passionate about cleaning toilets.
“People love enthusiasm. And if you’re not enthusiastic about what you do, your team won’t be and your customers won’t be. You’ve got to be the No. 1 cheerleader about what it is that you do.”
8. Get customers
The Inmates to Entrepreneurs program focuses on a simple business question: how do you get your first dollar?
“Accounting, very interesting. But instead of worrying about how to do the accounting, let’s have something to count,” says Brian Hamilton, founder of Inmates to Entrepreneurs. “We’ve been very focused on that because we want people to be able to provide for their families.”
Inmates to Entrepreneurs’ graduates are often interested in starting service-based businesses such as landscaping or cleaning services, which tend to have lower barriers to entry in terms of finding customers and startup costs.
9. Fund your growth
Securing start-up capital or funding to finance a business expansion can be difficult for returned citizens. Banks are less likely to loan money if they perceive a risky investment. Many returned citizens self-fund their businesses through slow growth or ask friends or family to make small gifts or investments.
Hearn says big-budget loans are possible, though. With PEP’s Tim Hamilton serving as his advocate and carefully tracked financials to back his request, Hearn has secured funding from big-name banks. “If you’re making some kind of money and you have been profitable in some kind of way, then the doors are gonna be open to you,” Hearn says. “You may have to explain things in a certain way. But the first thing is just to make sure you’re crossing your t’s and dotting your i’s. You know, do things the right way.”
For most returned citizens, however, he suggests approaching smaller banks where they can speak to an individual and explain their backgrounds. These banks are more likely to see the humanity behind someone’s history.
Fresh start business grant
Unlike small business loans, grants can provide aspiring business owners with funding that doesn’t need to be repaid. These can be one of the best ways for formerly incarcerated individuals to get business funding—as these business grants come from corporations and nonprofit organizations. In other words, there are funding opportunities designed specifically for previously incarcerated people.
Below are a list of programs that may be a fit if you’re an aspiring entrepreneur with a criminal background:
- Rise Up, Get Started Grant Program
- The Transform Business Grant
- Georgetown Pivot Program
- LEAP Virtual Entrepreneurial Academy
- Amber Grant
- NASE Growth Grant
- Bizee’s Fresh Start Business Grant
Starting and running a business can be one of the most sustainable ways for judicially impacted individuals to earn a living, especially for those with felonies. Although formerly incarcerated individuals face a lot of challenges as entrepreneurs, there are a variety of privately funded small business grants and resources that can help.
Photo courtesy of Brian Hamilton Foundation.