Gunsmithing Questions about getting an FFL/SOT

[BigNoise]

*If this is in the wrong section, feel free to move.*

I am considering getting an FFL and SOT when I get out of the Army. Right now I am just trying to figure out all the little legalities, rules, exceptions, etc. related to the process.

-I have heard conflicting information regarding ITAR. Do all Type 07/Class 2 manufacturers have to pay?

-My theoretical gun business would be set up as an LLC. I know that in cases of non-FFL LLC's, any items purchased by the LLC are owned by it into virtual perpetuity (depending on how it's set up). If one were to be a Type 01/Class 3 dealer, any items I purchase are owned by "my business/LLC", not "me". If I were to let the FFL/SOT expire at a later date, would I have to transfer my NFA items to myself, paying the $200 per? Or as long as the LLC still exists, do the items remain owned by it, with no additional tax needing payed?

*Edit*
I think I just found my answer on SilencerTalk. Appears that no additional tax is needed if the SOT expires. Still, any input is welcome.

-Regarding LLC's, if I were to name my dad/brother/whoever as "members" or whatever of the LLC, are they legally able to conduct day to day business related to the FFL/SOT process, just like a normal gun store employee?

I realize most of you are not lawyers, ATF agents, etc. I'm just looking for help from those who have gone through the process.

I'm sure I'll think of more questions later.

 

[Straight Shooter]

Re: Questions about getting an FFL/SOT

Why is ITAR (International Traffic in Arms) even an issue? Are you importing or exporting anything across our national borders?

Anything the business owns would need to be transfered to the individual when he goes out of business. If it is post 1986 automatic firearm it must go to another class 3 dealer.

Here is an interesting read on this very topic. http://answers.yahoo.com/question/index?qid=20100109200036AAS5a1y

<span style="color: #3366FF"> I am a legal NFA owner and member of the Alaska Machine Gun Association. Be nice if only people with a clue would answer stuff like this.

Assuming you do get a SOT Class III license and open a store - yes you can purchase post 1986 machine guns and dealer samples - but there is a catch. The catch is once your license expires in three years - you have to either sell/transfer them to another dealer or surrender them to NFA. Your SOT license does not simply automatically get renewed just by paying money - you need to show that a sustantial amount of your taxiable income is derived from the firearm business. Once they figure out you are doing this just to own samples - you are sunk. To make NFA happy you need to show a profit of at least $30,000 - assuming a 22%-35% markup - that is almost $440,000 in annual sales......... selling an @ssload of suppressors, SBR's and AOF's would help too - 200-225+ a year would be good. This is allot of customers - you need to live where you have a good customer base and plenty of interest.

'Letters' are given to you by a local police chief for you to demonstrate a new firearm to a city or town department. You use the letter to qualify the need to buy a dealer sample from a dealer. No letter means no sample. You can only trade that dealer sample to another dealer who has a letter. This is all find and dandy until our 3 years is up. If your SOT is not renewed - you have to give the government all your samples - samples that you paid $4,000+ for.

Personally - I don't think you and your dad have the experience or know how to pull this off. Nobody becomes a SOT Class III dealer to own a machine gun - there is allot to learn about machine guns. Nobody buys a car dealershp because they need a car to go to and from work in. Duh? From belt fed 1919's, grease guns, etc etc. It is an entire new world of buying and trading to itself. One mistake - and you ruin a transferable lower that is literally priceless. If you or your dad was an ex NATO armorer and familiar with both US and European current and legacy full autos, maybe - but if he is only a US trained Army armorer - not enough.

What you can do is beocme a Class II manufacturer. This is much more fun and sounds more like what you would enjoy. As a Class II manufacturer you can buy, sell, trade and modify suppressors, install suppressors - and own and posess NFA dealer samples. When your license expeires - if you have been in the business more than 10 years or retire - you can keep them. The 'catch' here - any machine gun or suppressor you own as a dealer sample can only be transfered to somebody in your family that is of the first kindred. Mom, dad, sister, brother, son, daughter. You can pass the samples down through the family - but - can never, ever be sold. If your estate has no heirs - the executor can donate them to a local police dept on a NFA Form 10, or, they are surrendered to the NFA Branch.

You need to seek out a real Class III dealer and form a relationship. After a few years - then make a decision.

Me - I would rather my sons be able to fire a semi auto AR-15 and hit 20 targets with a 20rd mag in one minute........... than have them flash off a 40rd mag in 3 seconds and hit nothing. Don't get me wrong - I love full auto - but after a few hours of trigger time and getting tired of buying ammo - they become just another safe queen.

Hope this helps </span>

 

[wtopace]

Re: Questions about getting an FFL/SOT

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> -My theoretical gun business would be set up as an LLC. I know that in cases of non-FFL LLC's, any items purchased by the LLC are owned by it into virtual perpetuity (depending on how it's set up). If one were to be a Type 01/Class 3 dealer, any items I purchase are owned by "my business/LLC", not "me". If I were to let the FFL/SOT expire at a later date, would I have to transfer my NFA items to myself, paying the $200 per? Or as long as the LLC still exists, do the items remain owned by it, with no additional tax needing payed?</div></div>

I actually asked this question at the ATF booth at the DFW gun show last weekend (out of my own curiosity). They told me I could transfer the NFA items on a Form 5 ONLY if my business was structured as a sole proprietor. I was told with an LLC / Corp I would be required to transfer (since the business is a different entity) on a tax-paid Form 4. Now, I don't plan on letting my SOT lapse, so it is not an issue, but please call the ATF directly for questions as the internet is NOT a reliable source of legal information (a lot of times people online are just flat-out wrong).

If you take one thing away from this thread (yes, I am a licensed dealer / 03 SOT) - Please send ALL legal questions to the ATF, no matter what people online tell you or how many years they have been licensed, the ATF is who does your inspections.

To the previous poster saying there is a sales minimum requirement, I call BS on that too (I know it was not you, but was from another forum). The SOT is nothing more than a special tax levied on a business entity to allow multiple transfers without a per-item transfer fee. I have never been asked to sell any amount of items on a per-year basis, this is just absurd.

The only thing to worry about (imho, I am not an ATF legal advisor) is make sure you aren't using a SOT in place of Form 4s for yourself (don't structure a sole prop. and expect to transfer only 5 suppressors, then 5 more Form 5s and expire the SOT year one, you will get caught and charged with back tax of 5 * $200 + the $500 SOT).

If you are making a legitimate business I say go for it - the more hard-working knowledgeable (very-important) FFLs we have the better we are.

 

[wtopace]

Re: Questions about getting an FFL/SOT

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">-Regarding LLC's, if I were to name my dad/brother/whoever as "members" or whatever of the LLC, are they legally able to conduct day to day business related to the FFL/SOT process, just like a normal gun store employee?</div></div>

Sorry, I missed this question. They can be signed on the FFL as a "Responsible Person" to conduct business and sign the FFL with their name during a transfer. This will allow them to do transfers and NICS checks.

 

[BigNoise]

Re: Questions about getting an FFL/SOT

Thanks for the info.

I realize forums aren't the place for legal advice, but I like to get as much info as I can before taking my questions to the powers that be.

Right now, a sole proprietorship is looking like a good option. No yearly fees like an LLC, and if I let my FFL/SOT expire, I can keep all my items tax free.

 

[kjcpoint]

Re: Questions about getting an FFL/SOT

Check out FFL123.com all the info you will need.

Kyle

 

[dynamic research]

Re: Questions about getting an FFL/SOT

Big Noise,
I would wait until you get home. They are going to need to inspect the address you have on the forms. They wont license you until they see that. Do all the home work before hand that way it will go much smoother when it is time to fill out the forms. Also down load the ATF manual off the internet and look at the laws and rules that will pretain to your business.. By the way, how is the rock? I was stationed there from 85-89 in F-Quad. We helped set up what was the sniper range in area X. We were trained by the snipers at K-Bay. I was wondering if this range was still operational and did they finish the school house?

 

[wtopace]

Re: Questions about getting an FFL/SOT

Another piece of advice, definitely don't both with any of the scam websites attempting to "sell you an FFL". The license is free and the ATF exists to help with these kind of tasks and questions. Good luck!

Pick up a law book if you want to do some reading. The docs are free.

http://www.atf.gov/forms/dcof/
ATF P 5300.4

 

[BigNoise]

Re: Questions about getting an FFL/SOT

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Stephen Damron</div><div class="ubbcode-body">Big Noise,
By the way, how is the rock? I was stationed there from 85-89 in F-Quad. We helped set up what was the sniper range in area X. We were trained by the snipers at K-Bay. I was wondering if this range was still operational and did they finish the school house? </div></div>

Oahu isn't too bad....definitely not the worst place to be stationed!

I've been to area X a bunch, but I'm not sure what is (or was) the sniper range. We've also been to K-Bay a couple times in the last month....LRM (500m) and team live fires.