Experiences starting a home-based FFL

[Gutter]

Still doing research and weighing if it's worth my time and effort or not, but I wanted to check with the community first and see what your experiences were like trying to get the licenses, permitting, and everything else setup for running something out of your home. Having held an FFL03, the ATF paperwork doesn't scare me, but all the time and money spent on navigating local requirements may make such a side venture not worth it. For those of you who've successfully (or unsuccessfully for that matter) setup a home-based FFL, what have your experiences been? Is it worth it?

[kemasa]

As far as how easy of difficult, as well as the cost, it really depends on exactly where you live. One place was difficult and another was easy.

It depends on what you mean by worth it. Unless you find a special business, you are not going to make much money. There is really no money in selling new firearms, only used firearms, which requires a lot of knowledge. You can do transfers, but working by appointment means that you have limited time.

There are a lot of expenses with all the permits/licenses and insurance, and there is a lot you need to know in terms of state, local and federal law, including sales tax issues.

If you are doing it for the money, I would say it is most likely not worth it.

If you still want to consider it, go to your local business office (city hall) and see if you can even do it. For example, LA County does not allow home based businesses in which people have to come to the house. If you live in a City, then they are the ones who decide, not the County.

[rbetts]

Sac County or within A City?? What are some of your specific questions? 10 years of experience as a home based here in your neck of the woods.

[Gutter]

Sac County or within A City?? What are some of your specific questions? 10 years of experience as a home based here in your neck of the woods.

Unincorporated Sac county. My biggest question is what kind of permitting is needed typically (conditional use, etc) and how readily are they granted in our area. I'm expecting to spend a few thousand for the permitting and everything, but is it just thousands or tens of thousands?

As far as making money, this wouldn't be my full time job and just an extension of my hobby. Looking to get into estate liquidation specializing in C&Rs and military collectibles so I can just Gunbroker most of it. Maybe do a few gunshows as well. I just wanna handle as many interesting guns as I can without spending my own money and maybe make a few bucks on the side.

[Burbur]

It worked for me.

Starting in unincorporated anything makes life a lot easier. By the time I got laid off from my day job, my hobby had become a business. Found darn near everything I needed to know, on these forums.

Find a niche and be the best at it. If you want to do estate stuff, you got to make good with the real estate agents, probate court appointees and the ladies that run the garage sales. Emphasize the complexity of CA law, your ability to do everything by the books, on top of getting them the best return in the shortest time.

[rbetts]

Sac County Business licensing does not restrict FFLS from operating out of their home. You'll have signage, traffic restrictions, No Employee reporting and no Walk in Sales At your Residence. The sheriff will not let you sell used firearms (Pawn/consignment).

[Gutter]

Sac County Business licensing does not restrict FFLS from operating out of their home. You'll have signage, traffic restrictions, No Employee reporting and no Walk in Sales At your Residence. The sheriff will not let you sell used firearms (Pawn/consignment).

Well that's good news and bad news. If it's just the business license, I should be mostly set. I don't intend to have any signage or high traffic as I want as few people coming to my residence as possible. The consignment issue may be tricky because that's half my business model related to estate liquidation. What's the deal with that restriction? Is it applicable even if your sales aren't local and online only?

[I Swan]

I see this being a money pit and a losing situation and unless you have some connection where you know you'll be consistently able to purchase or take on consignment decent sized and desirable collections.

Many other more established places already do this. Also not everybody wants to consign guns you'll need the capital to be able to purchase collections.

[Gutter]

I see this being a money pit and a losing situation and unless you have some connection where you know you'll be consistently able to purchase or take on consignment decent sized and desirable collections.

Many other more established places already do this. Also not everybody wants to consign guns you'll need the capital to be able to purchase collections.

All things I've taken into account and planned for. I've already personally identified what niche I'm trying to target and how I want to execute my business plan. Again, I'm not relying on this to pay my bills; just further my habit/hobby. Conversely, what are you seeing that I may not be? Have you been in a similar situation and is there some unknown pitfall that may doom this venture from the start?

[I Swan]

All things I've taken into account and planned for. I've already personally identified what niche I'm trying to target and how I want to execute my business plan. Again, I'm not relying on this to pay my bills; just further my habit/hobby. Conversely, what are you seeing that I may not be? Have you been in a similar situation and is there some unknown pitfall that may doom this venture from the start?

Never had my own 01 FFL but have worked in the industry and been around it all my life. What I just see happening is that the expense and time needed won't justify what you want unless you know you will have somewhat steady access to estate collections and the means to buy them.

Of course if you want to try is worth a shot but the regulations and expense and headaches just don't seem justifiable for what you think you'll be able to do.

Not being a standard brick and mortar shop also hurts you for your plan unless like I said you have some sort of connections to acquire large lots of collectible guns.

The average person selling off their dead relatives guns just goes to local gun shops or if a bit smarter seeks out an auction house. What angle do you have to steer these people to you?

[Gutter]

What angle do you have to steer these people to you?

Word of mouth and reputation. I do know a few dealers and estate liquidators that I can get in touch with to start up. From my experience, there is a market need for what I'm looking to do. I've already done similar consulting for a couple dealer friends and I tend to run into opportunities to buy collections fairly regularly. I've also seen that a number of local liquidators haven't got a clue when it comes to militaria and are either giving it away or pricing stuff so high that it just sits for months (happens with bayonets a lot). I don't need the high volume since I have my 9-5 to worry about and my operating costs are my hobby costs anyway. None of this even includes the searching I do on my own for deals.

Business strategy aside, I'm more concerned with concrete lessons related to starting up and operating. That's really going to be what steers me one way or the other.

[rbetts]

You may run into trouble with the ATF as they frown on 01FFL "hobbyists". The business needs to be a viable concern. They will ask you about this and then about the number of guns you intend to sell each year. . . .

[Gutter]

You may run into trouble with the ATF as they frown on 01FFL "hobbyists". The business needs to be a viable concern. They will ask you about this and then about the number of guns you intend to sell each year. . . .

Thanks for the heads up. If I remember correctly, I think I acquired somewhere around 87 or so firearms that needed to be logged on my 03 over the last 2.5 years before I took an extended break in February (not counting the modern ones). Hopefully, beyond that sort of volume passes muster with them. Part of the reason I want to legitimize myself as an 01 and start a viable business is that I don't want to cross into any gray area where my use of my 03 would be called into question. That and the fact that I think I've found a an area that could be profitable and I wouldn't mind supplementing my income. I'm using the term "extension of my hobby" loosely.

Has volume ever been an issue for anyone?

[Nardo1895]

I'm starting my third year as a home based FFL in Central California. I am strictly a "word-of-mouth" business. I'm located in an unincorporated part of the County.

It was pretty expensive to get started. Licenses and required background checks alone ran almost $1700. Thankfully many are one-time expenses and some are multiyear licenses. I mostly used stuff I already had for office equipment but did have to buy a few things like a CDL reader. Needless to say I did not make a profit in year 1.

I just finished out year 2 and I made a decent profit this year. Expenses were low and I had a surprising amount of sales. Someone else commented that you can't make much money on new guns which is most of my business. I have found that to largely be true, but I did make some extra money doing transfers and mailing handguns for customers. While I did make a profit, its a good thing I have another job.

I have not done a lot of used gun sales yet. I have sold a few from my personal collection, but with a word-of-mouth business, I don't get many people looking for used guns. I do not keep a large inventory and I don't display them so I think the only way I'll do much with used guns is via the internet. Between my real job and duties at home, I have not had enough time to really start the internet side of my business.

I think I did about 20 DROS in year one and maybe 50% more than that in year 2. That doesn't count the firearms I've mailed, and I frequently do multiple sales or transfers on a single DROS. Both my DOJ and ATF reps know this isn't a full time business. They have not commented on my volume, but my ATF rep has been very encouraging and indicated there are a number of home based FFLs doing the same thing in her area of responsibility. I think the IRS may be as big or bigger an issue as ATF/DOJ. Too many years with no profit will signal them this is a hobby and not a business. I have no clue yet how much profit is necessary to stay off their radar.

The hardest part of getting an FFL was getting the County business licenses (I have two, one for new and one for second hand). They initially wanted me to go through a process of officially notifying my neighbors of my intent to operate. Their main concern wasn't firearms sales, it was traffic in the neighborhood. I convinced them that with my business model my neighbors would never know I was operating a business. The key was no visible advertising and a low volume of traffic. Once I had those two, everything else just took money and time to fall into place.

Knowing what order to get licenses was also a bit of an issue. For instance, the County wanted me to have the FFL before they considered giving me the business license. They also wanted my CA license before issuing my business licence. I didn't want to incur the expenses of the FFL and the State permits until I knew I would be approved. I was able to get tentative approval from County Planning pending receipt of my State and Federal licenses. In my county the Planning Department has to buy off on the home based business, but the Sheriff's Department actually issues the business licenses for new and used firearms sales.

The biggest challenge I've had has been book keeping and taxes. I used Excel to come up with a book keeping system and Turbo Tax Business for income taxes. We'll see how good I did once I get audited.

Was it worth it? I'm having a ball. I get to help people find stuff they want and since I'm referral only I can say with all honestly I have not had a single "bad" customer. I'm making a little money and I have access to wholesale suppliers. I've been able to buy firearms at gun shows that are not C&R, or from people who are not willing to sell to a C&R license. I have been able to buy stuff I think I can flip for a profit and I have added a couple guns to my collection that way.

A few other things to consider:

A lot of wholesalers will not sell to a home based FFL, they want a brick and mortar store. Seems like that list is growing. But there are still wholesalers that will sell to home based.

I'm not sure how you'd be able to operate without a license to sell used firearms. When I applied I said the only used gun business I would do would be to accept internet sales for local customers, and do Private Party Transfers which you are required to do if you are a CA Dealer. I was told I had to have a second hand license just to do the transfers, even though they were not really sales.

Insurance can be an issue. You can't rely on your homeowners policy.

Good Luck!

[rbetts]

Low volume will bring additional scrutiny from the ATF. The DOJ, not so much. Just be prepared to answer their questions.