If You Are Considering Opening a Gun Shop Here Are Some Large Caliber Tips

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By Marc A. Scaringi, Esq.

My firm handles a lot of new business formations and firearms law. And sometimes they intertwine.

Firearms manufacturing and sales are big business in the U.S. The ATF’s 2017 annual report on Firearms Commerce in the United States shows an estimated 43 percent increase in firearms manufacturing in the U.S. within the last five years. In 2015, the number of firearms manufactured grew to more than 9.3 million, up from the approximately 6.5 million firearms manufactured in 2011.

In 2017, we had 137,464 Federal Firearms Licensees. That’s the license you need to manufacture, deal, trade, import, export or course sell firearms and ammunition in the US. They’re colloquially know by their abbreviation, FFLs. We have 6,300 FFLs in Pennsylvania.

Some of you may be interested in taking your interest in or passion for firearms to the next level by opening-up a gun shop. If so, you’ll need to complete the FFL application – it’s a four-page application. And, you’ll need to pay the application fee which ranges from $200 to $3,000 depending. For most who simply dealer in standard firearms the fee is $200. You will then be subject to a background check and an investigation of your intended gun shop location by the Field Office of the Bureau of Alcohol Tobacco, Firearms and Explosives.

Some common reasons for denial of your FFL application may include failure to comply with State or local law (such as zoning ordinances), evidence of previous willful violations of the Gun Control Act, or falsification of the application.

If the ATF grants your application, you can begin business. The total process will take approximately 60 days from the receipt of a properly completed application.

So if you have any interest in opening up a gun shop, here’s a tip. First, form your Limited Liability entity before you complete the FFL application. That’s because the FFL is not transferrable. The FFL is issued to a specific person or specific business entity for one specific physical location and for a specific class of operations for a three-year period.

I have counseled gun shop owners who completed the FFL application in their own name. Thus they are running a gun shop as a sole proprietor which has serious and negative liability consequences to the owner. And, so now they wish to incorporate or form a limited liability company for liability, tax or estate planning reasons. But, because they applied for and received the FFL in their individual name, they will now need to start over if they wish to incorporate.

There is way we can help you do this. We form the LLC or corporation and then effectuate a transfer of the assets of the gun shop into the LLC or corporation. For a period of time the FFL is holding two licenses at the same time. But, in the end we surrender the original and continue the business under the new FFL that is in the name of the LLC or corporation.

If you are an FFL and you hold the FFL in  your individual name, you are well-advised to contact an attorney to have transfer your firearms business into a newly formed limited liability entity. But, of course you must do so in complete conformity with ATF regulations. You do not want to make a mistake and have the ATF take and adverse action against your license.

If you would like to learn more about this topic, do not hesitate to give me a call at 717-657-7770. I would be happy to help your incorporation your gun shop.

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