Moving NFA items to SOT

[slm222]

I have a friend who has a business which is a ranch that has clients and guests out for hunting and entertainment. I just say that to establish he has a corporation. He owns a couple suppressors and SBRs personally. We were discussing a potential better solution rather than just doing a trust and I mentioned a potential for an FFL and SOT. Being that there’s no ATF approval wait, not everyone needs their fingerprints taken, and a potential to own machine guns as well. Is this something that y’all think would be obtainable and if so which SOT would be best? They own a veritable arsenal to include non firing tanks, so the yearly fee is not a big deal if having it affords them more flexibility. I know very little and am seeking your help in gaining an understanding of which direction to go.

One of the biggest concerns is how it can continue in the family after his death.

Thank you in advance

 

[Coffee_and_Pipes]

I don’t have an FFL, so talking to a lawyer or people with experience would supercede anything I have to say, but I’ve considered it in the past, and this is a website I’ve looked at. Like I said, I haven’t gone through the process, so an actual expert might say that site is crap.

I was under the impression that going with an 07 FFL would give him wider access to machine guns, but I think he would have to demonstrate that he is trying to get LE sales to validate his licensing. It might be something to ask about when he speaks with qualified professionals.

 

[CoryT]

What is the end goal? What will be the firearms business of the corporation? Getting an FFL for the purpose of a personal collection will not be approved, you need to be doing business. Do you want to deal with the paperwork and inspections?

Firearms can be transferred to the Corp entity without an FFL. The corporation survives the death of officers, so that's not an issue. Officers and employees may have possession of the NFA items, presuming they are not an otherwise prohibited person. Not sure what you mean by ATF approval wait, dealer transfer times are shorter, but Form 3's still get approved. If you go Class 2 you can build stuff and simply file a Form 2 to register post-sample MG's and items other than DD's.

NFA items listed in a will transfer to heirs via a tax-free Form 5, so for an individual owner simply listing them in the will takes care of that. For others to posses the items outside the presence of the registered owner would require the trust or corporate ownership.

 

[lariat]

Cory brings up a good point about the FFL. It won’t be approved if it is only for personal use, nor do you want to deal with the audits and yearly paperwork hassles, cell phone texts about a local shop that was robbed, random people calling to see if you will transfer a firearm for them, etc. Unless it is intended to be part of a revenue stream for a business it would be best to ditch this avenue of approach.

 

[slm222]

What is the end goal? What will be the firearms business of the corporation? Getting an FFL for the purpose of a personal collection will not be approved, you need to be doing business. Do you want to deal with the paperwork and inspections?

Firearms can be transferred to the Corp entity without an FFL. The corporation survives the death of officers, so that's not an issue. Officers and employees may have possession of the NFA items, presuming they are not an otherwise prohibited person. Not sure what you mean by ATF approval wait, dealer transfer times are shorter, but Form 3's still get approved. If you go Class 2 you can build stuff and simply file a Form 2 to register post-sample MG's and items other than DD's.

NFA items listed in a will transfer to heirs via a tax-free Form 5, so for an individual owner simply listing them in the will takes care of that. For others to posses the items outside the presence of the registered owner would require the trust or corporate ownership.

Thanks for bringing up that point. During my research following the post I started to see that actual business of selling and/or making of NFA items.

Their biggest hang up if that they have many people that have several members now on the corporation as officers (famil) and the concern is that trying to get them all to get fingerprints and pictures will take a lot of coordination that will likely drag out. He also have a couple suppressors in registered to himself that he would like to have all brought to one ownership whether that be the corporation or trust.

I did suggest he can do a trust with just himself and get all items transferred and purchased and once he thinks he’s done for a while tHen add the other members. Would this be a more practical approach?

 

[CoryT]

Is the goal to have people have access to the items now? If so, then a trust works fine, the individuals just supply their prints and photos as they are added to the trust. If it's inheritance, it's covered by a will and a a free transfer to the heir. If employees need access, then a corporation is the solution, transfer to that and designate qualified employees. Note that if you go the corporate route, then inheritance goes out the window, transfers out of the corp are always tax paid.

 

[E. Bryant]

The ATF says that you must obtain an FFL if you "intend to engage in a business". They don't specify how much business you must do, or how well you must run this business. You just need to do some business. In today's day and age, it ain't that hard to find customers who need to do a transfer. I bet that includes say least one of good existing clients. Don't invent impediments that don't exist.

The first thing you need to do is to research your local zoning regulations, because almost nothing else shy of a prior felony conviction will bring this process to a screeching halt any faster. Assuming that you don't find anything obvious in the regulations, make a face-to-face appointment with your zoning official, be nice, and confirm that what you're trying to do is acceptable. You'll need to get this in writing now or shortly after the ATF begins to act on your application, so behave accordingly.

Next, form your LLC (assuming you don't do this under the existing corporation), complying with the laws in your state. Get a local business license if necessary. Make sure to get a federal EIN. Open a bank account. Get a state sales tax license; it's not necessary for the FFL or SOT but you'll want to have that when setting up distributor accounts.

Now, complete your FFL application accurately. Don't misspell the name of your company or select the wrong type of license or anything like that. My ATF guy said it's rare that the applications are correct and accurate, and it's a big pain in his ass and the second most common reason for denying a license application (the first is local zoning regs). Think of this as a first-other filter; if you're too dumb to fill out the application properly then you may not make it as a gun dealer.

Assuming you've done all the correctly and that you can pass the background check (generally the same as that for purchasing a firearm + verification that you haven't previously lost a firearms license), you just need to not screw up your "interview" (really a three-hour-long review of dozens of forms). Take notes, ask intelligent questions, try not to fall asleep, and you'll likely pass. Wait a few weeks and the license will show up. It's that simple. The SOT is a separate deal, and it's not anything more than a receipt for paying a tax.

Transferring most Title II items in/out of the entity is straightforward. You'll need to file Form 3s for transfers between SOTs but those typically clear in 1-2 weeks. Machine guns (specifically anything post-'86) are another matter entirely and well beyond the scope of a forum post, particularly considering the attention they've recently brought to some big names.

SOT items will be owned by the corporation and so that's going to determine succession in case of the passing of the corporation's member(s). Such matters are well above my pay grade and best discussed with your local attorney.