If you are planning on starting a new firearms business (dealer, manufacturer, or importer), you really need to consider proper corporate/company protections that are available, as well as, ensuring that the Operating Agreement or By-Laws are tailored to your business in the firearms industry. While I have been providing this service for Pennsylvania Federal Firearms Licensees (FFLs) for years, I recently began working with Attorney David Goldman of GunTrustLawyer.com and his network of attorneys to provide this service across the United States. Because there are so few attorneys across the United States that practice in this niche area, and due to the number of inquires that I receive across the US, I felt it was important to find a way to provide this service to everyone.
While some individuals may turn to online corporate formation providers or contact their family attorney, neither of these avenues can provide the proper legal advice on setting up either a Corporation or Limited Liability Company (LLC) for an FFL, unless the provider has experience with the firearms industry and pertinent issues. I have developed FFL-specific By-Laws (for a Corporation) and Operating Agreements (for an LLC) that deal with these issues and set the foundation for any firearms industry specific issue that may arise. Some of the issues that I deal with in this documents are:
- If the business entity is properly set up and administered, it can provide asset protection for the owners/members/managers own personal assets, ensuring that they are not personally liable. Furthermore, many of the generic corporate/LLC documents limit the conduct or activities of their owners/members/managers. If utilized and those limitations are ignored, the business entity may not shield the owners/members/managers from liability.
- Properly drafted, the By-Laws or Operating Agreement allow for growth, including taking on new members or shareholders that can provide additional revenue streams for the business.
- Any By-Laws or Operating Agreement for an FFL needs to take into consideration the possibility that an owner, member, or manager could become a prohibited person, and if so, what occurs in relation to their investment or right to control the business. Properly drafted By-Laws and Operating Agreements define when a person becomes prohibited and provide guidelines of what that person may and may not do in relation to the business and the FFL. Similarly, it should set-forth what occurs if an employee becomes prohibited and the steps necessary for that employee to immediately take upon becoming prohibited.
- If you decide that you no longer wish to continue the business, properly drafted By-Laws and Operating Agreements allow for you to sell the business with the licensing already in place. This makes for an easy sale and transition to the new owners without a loss in revenue during the transition period.
- If, on the other hand, you desire to keep the business in the family for generations to come, properly drafted By-Laws and Operating Agreements provide for the Corporation or LLC to be passed down through the family for generations.
- Another often overlooked issue that should be contained in these documents is direction for the Corporation/LLC to enact policies and procedures that are more stringent than federal and state law or regulate issues that are not dealt with by federal and state law. By having additional policies and procedures in place, you are less likely to lose your FFL as a result of violations, provided that the violations are mitigated by those policies and procedures.
- Specific issues that arise and legal advice pertaining to the different types of licensing. Many FFLs innocently think that their purchase of a receiver and assembly of that receiver with a parts kit constitutes gunsmithing, when in reality, it constitutes manufacturing. By seeking out proper legal advice, you be assured that you understand the proper licensing for your business and desires.
In addition to firearms industry specific By-Laws and Operating Agreements, you want to ensure that your FFL application and Special Occupation Tax (SOT) application are correctly filled out and filed, so that they are not rejected.
If you would like to schedule a time to discuss your circumstances and goals, contact us today to discuss your needs. If you already are an FFL, we can amend your existing By-Laws or Operating Agreement, or, if you are a sole-proprietor or partnership, set up a proper corporate structure to protect you.