Compliance & LLC Formation
Operating in the correctional communications space requires careful attention to federal and state regulations. This guide covers everything you need to operate CellMateAI legally and professionally.
Disclaimer: This is informational guidance, not legal advice. Consult a licensed attorney before operating in your jurisdiction.
Step 1: Form Your LLC
Before signing any facility contracts or accepting payments, you need a legal business entity. An LLC protects your personal assets and is required for most B2B contracts.
Choose Your State
$90 filing feeDelaware and Wyoming are the most business-friendly states for LLCs. Delaware is preferred for future VC investment.
File online at Delaware Division of CorporationsFile Articles of Organization
$50–$150/year for registered agentRegister your LLC with the state. You'll need a registered agent in the state of formation.
Use a registered agent service (Northwest, Registered Agents Inc.)Get an EIN
FreeEmployer Identification Number from the IRS. Required for bank accounts, taxes, and contracts.
Apply free at IRS.gov — takes 5 minutes onlineOpen a Business Bank Account
FreeKeep business and personal finances separate. Required for facility contracts and investor due diligence.
Mercury Bank is ideal for startups — no fees, great APIDraft an Operating Agreement
$99–$500Defines ownership percentages, decision-making authority, and what happens if a partner leaves.
Use a lawyer or LegalZoom for a basic operating agreementGet Business Insurance
$50–$200/monthGeneral liability + E&O (Errors & Omissions) insurance. Required for facility contracts.
Next Insurance or Hiscox for startup-friendly coverageStep 2: Regulatory Compliance
Prison communications are heavily regulated. These are the key compliance areas you must address before operating.
Communications Assistance for Law Enforcement Act
- All calls must be logged and available to law enforcement upon valid legal request
- Facility administrators must be able to access call records
- No encryption that prevents lawful interception
- User consent notice must be played at the start of each call
Federal Communications Commission — Prison Phone Rules
- Rate caps for intrastate calls: $0.21/min (prisons), $0.31/min (jails)
- No mandatory flat fees or ancillary service charges without consent
- Billing transparency: itemized statements required
- Refund policy for unused prepaid balances
Health Insurance Portability and Accountability Act
- Mental health conversations may constitute PHI (Protected Health Information)
- Implement minimum necessary standard for data access
- Business Associate Agreements (BAA) with cloud providers
- Incident response plan for potential data breaches
California, Texas, Florida, New York
- CA: CCPA data privacy rights apply to inmate family members
- TX: Texas Penal Code §38.11 — contraband phone restrictions
- FL: Florida Statute §944.47 — unauthorized communications
- NY: NY Correction Law §623 — phone access requirements
Step 3: Privacy & Terms Requirements
Your Privacy Policy and Terms of Service must cover these specific areas for prison communications platforms.
Step 4: Facility Contract Requirements
Before signing a facility contract, you'll need these documents and certifications in place.
Issued by your state — proves your LLC is active and in compliance.
Minimum $1M per occurrence. Most facilities require this before signing.
Written policy covering how call data is stored, accessed, and protected.
Policy for vetting employees who have access to inmate data.
Script for the consent notice played at the start of each call.
Service Level Agreement guaranteeing system availability (99.9% recommended).
Recommended Resources
Official FCC guidance on rate caps and billing requirements.
Research on prison phone costs and reform advocacy.
Official Delaware Division of Corporations filing portal.
Free EIN application — takes 5 minutes.
Legal resources and advocacy for prison communications rights.
Digital rights guidance for prison technology providers.