what i need for gunsmith ffl-01 setup

[stitchnicklas]

so i am going to be ready soon $$$$$ wise to file for my 01 ffl to open in home gunsmith business.
i plan on doing service based only with appointment business hours only to start until i retire from my union in 3 years.no retail or ppt transfers.
customer will pay for parts/material/labor/custom tool@ 20% of cost
i have a 03 FFL & coe already so i am not a prohibited person in anyones eyes so far.

what i would like is constructive advise from ffl's or those with industry experience on tips or advice.

i know i need
coe--have already
boe
fictitious name
business license
01 FFL

also know i need
decent quality safe for business only(getting a cannon)
surveillance system
separate tracking of income/expenses (will get a business/seperate account bank account)


dunno
CFLC LIST??

[lugnutwrench]

Some Advice...

• Incorporate (an LLC is probably simplest) [edit: and have the corporate entity apply for and hold the 01]. You already have your 03, so there's really not much benefit to having an 01 as a sole proprietor. If you're the only owner of an LLC, I think you don't have to do K-1s for taxes (check with an accountant on this). Get an EIN, even if you don't ever anticipate having any other employees. Avoid commingling money or assets.
  
  
• Make sure you understand your local zoning laws, and have all necessary local business licenses, permits, letters, or whatever else you need from your local municipality or county before you apply for your FFL. Note, if your local area does not issue special licenses or endorsements for firearms dealers, you will likely need a letter from the city/county to this effect. Some cities/counties are reluctant to write such letters. Make sure you research this before spending money on getting fingerprinted, or writing a check to the ATF for the application fee. If you rent your home, you may need to get an endorsement on your lease that having a home gun business doesn't violate the lease. Whether you rent or own, you will likely benefit for designating a specific part of your home (e.g., the garage, a specific part of the garage, a home office, etc.) to the firearms business. You will likely need to walk the ATF agent who conducts your interview through this.
  
  
• If you maintain any stock of significance, you might consider getting insurance covering theft/loss of the business' firearms. The NRA is a good source for getting a policy. Just be aware that the underwriters may require not only an alarm system, but one that meets specific requirements (which usually add to the expense). You'll probably want to research this as well.
  
  
• Don't forget about sales and use tax. For low volume businesses, it's paid to the state annually, so you'd better be putting money aside to cover this. I recommend getting at least a bare bones accounting system (like QuickBooks). If you don't know much about accounting, consider hiring someone a few hours per month to keep your books updated.
  
  
• Make sure you understand the ATF's perverse definition of "manufacturing". Avoid manufacturing per that definition. Instead, sell parts and receivers to your customers, and let them assemble them. This is often a confusing area. This forum is full of discussions on this topic. Read up as much as you can.

Finally, the people here are knowledgeable and friendly, but before you ask for help, make sure you make every effort to research the answer on your own first. Even though it was originally written for computer geeks, ESR's "How To Ask Questions The Smart Way" provides excellent general guidance on how to ask for help. Much applies to this community.

[ugimports]

[list][*]Incorporate (an LLC is probably simplest). You already have your 03, so there's really not much benefit to having an 01 as a sole proprietor. If you're the only owner of an LLC, I think you don't have to do K1s for taxes (check with an accountant on this). Get an EIN, even if you don't ever anticipate having any other employees. Avoid commingling money or assets.

..snip.

03 is C&R FFL - can't use to run a business. At a minimum need 01 for gunsmithing and eventual transfers/sales.

You need to register for CFLC if shipping anything.
Need HSC Instructor certificate if you are going to transfer handguns.

[lugnutwrench]

03 is C&R FFL - can't use to run a business. At a minimum need 01 for gunsmithing and eventual transfers/sales.
...

From original post (emphasis mine):

so i am going to be ready soon $$$$$ wise to file for my 01 ffl to open in home gunsmith business.
...

[ugimports]

From original post (emphasis mine):

I get that...I had quoted a section where you told the OP they didn't need an 01 because they had an 03 already..maybe you meant they didn't need more than an 01...wasn't sure..

You already have your 03, so there's really not much benefit to having an 01 as a sole proprietor.

[lugnutwrench]

I get that...I had quoted a section where you told the OP they didn't need an 01 because they had an 03 already..maybe you meant they didn't need more than an 01...wasn't sure..

Sorry I wasn't clearer. I meant there wasn't much benefit in applying for an 01 as a sole proprietor, as opposed to applying for an 01 as an incorporated entity. You give up the ability to do transfers to your own personal collection without a 4473, but that's about it. Either way, you still have to submit a DROS (for everything now), observe all applicable state waiting periods, etc.

In my mind that's too paltry a difference to give up the flexibility and insulation from liability that a corporate entity provides. One just has to be careful to treat it like a business and keep thing (books, money, assets, etc.) separate.

I've edited my original post to clarify this.

[ugimports]

Sorry I wasn't clearer. I meant there wasn't much benefit in applying for an 01 as a sole proprietor, as opposed to applying for an 01 as an incorporated entity. You give up the ability to do transfers to your personal collection without a 4473, but that's about it. Either way, you still have to submit a DROS (for everything now), observe all applicable state waiting periods, etc.

In my mind that's too paltry a difference to give up the flexibility and insulation from liability that a corporate entity provides. One just has to be careful to treat it like a business and keep thing (books, money, assets, etc.) separate.

Gotcha -- yes I agree..spend the $800 to setup as an LLC (or whatever entity) and insulate yourself. Since technically you can take/use the firearm during the waiting period anyway it's a moot point. Filling out a 4473 for yourself isn't a big deal in my eyes anyway.

[lugnutwrench]

Gotcha -- yes I agree..spend the $800 to setup as an LLC (or whatever entity) and insulate yourself. Since technically you can take/use the firearm during the waiting period anyway it's a moot point. Filling out a 4473 for yourself isn't a big deal in my eyes anyway.

Technically, even sole proprietors are required to pay the $800 minimum annual tax to the FTB. (Who says California isn't friendly to small businesses?) It's difficult to enforce, so a lot of people don't end up paying it, but in highly regulated industries (like practicing law, practicing medicine, operating a firearms dealership, etc.), you probably don't want to risk having your license yanked for something stupid like ducking tax payments (however absurd they may be).

[lugnutwrench]

One more thing...

Dealing with the CA Secretary of State (SOS) is a pain. If you don't get your corporate filings correct, you risk losing corporate protections. If you don't have $500-600 to pay a lawyer to do your articles of incorporation, etc., consider at least educating yourself before making the attempt. Nolo has some decent resources:

• http://www.nolo.com/legal-encycloped...ess-california
• https://www.nolo.com/products/the-sm...rnia-open.html

[lugnutwrench]

And another...

If you're going to gunsmith (if that's even a verb, although I've been using it that way), eventually, you may be presented with a problem requiring you to repair or replace a magazine whose capacity is greater than 10 rounds. Due to recent changes in the law, it is now more difficult to get parts/new mags. I would advise applying for your "Large Capacity Magazine Permit", which is a separate permit issued by the CA DOJ. There's no fee, but it does require demonstrating good cause. If you have any clients who are exempt from magazine capacity restrictions (e.g., law enforcement), this should be sufficient.

[stitchnicklas]

do i need a resell permit if i am doing service based business only????

i plan to AVOID doing transfers and new/used sales.

[lugnutwrench]

do i need a resell permit if i am doing service based business only????

If you will need to purchase parts for your customers in the course of providing your services, and if you want to buy those parts from a wholesaler or distributor, many of those wholesalers and distributors will require a Seller's Permit so that you (not they) are responsible for collecting and paying sales and use tax.

Otherwise, just get what you need via other resellers (like Amazon, Midway, etc.) and recoup your costs directly from your clients (or have your clients buy parts themselves).

i plan to AVOID doing transfers and new/used sales.

I planned to avoid being a slave to the state. How's that working out for me?

I may be making some assumptions about what you intend to do, but life has a funny way of taking us into areas we didn't think we'd end up going. Being able to perform transfers may come in handy someday. Even if you don't plan for it, it will behoove you to understand how to do them, and have the necessary infrastructure in place before you need it. For example, someone who is not mechanically inclined might want to hire you to build up a hard-to-get AR lower or a custom Rem 700 action that was purchased on Gun Broker the day before the customer came to you, and the seller is waiting to ship. It would be convenient for your client if you could: 1) receive the action; 2) perform the transfer; 3) and perform the work.

Also, just be aware that while the $25 DROS fee is not subject to sales tax, anything the FFL charges on top of it is. So if the FFL elects to charge the maximum $35 for a PPT, the sales tax is on (35 - 25) $10. (Many FFLs choose to pay this out of their own pockets to keep things simple for the consumer.) For a non PPT, where an FFL charges, say, $70, the sales tax is on (70 - 25) $50. Note that your municipality may charge a tax on top of the state sales and use tax. This is pertinent if your are selling things and shipping them to other places in California. For example, if your municipality charges 1% on top of the state tax, and you're shipping taxable items outside of that municipality, you (usually) need only collect the state tax.

Sales and use tax can be confusing. It is temping to buy tools and other things from one's suppliers that one might use in the course of business, but never resell. These things fall under the "and use" part of the sales and use tax. I recommend researching the nuances of sales and use tax before engaging your first client. Few things are more aggravating than realizing you "owe" some government extortionist stuff that you should have been collecting from your clients, but didn't.* It's not like you can call them up and say, "Hey, remember last year when I installed that rifle scope for you? Yeah, can you give me more money? I forgot to collect for sales tax." Won't happen. It's the vendor's responsibility to pay it. They can choose to pass those costs onto the consumer but they have to pay it either way.

Soapbox Time

For the record, I hate sales and use tax. It's oppressive, disproportionately burdens working stiffs, and is symptomatic of a sociopathic state. Just look at FAQ #7 from the CA BOE (emphasis mine):

7. What if I collect too much sales taxes reimbursement from my customers?

If you collect more than the amount of tax due, you must either return the excess amount to the customer or pay it to the state.

Really? If it's too much trouble for the customer to come back, or if the customer says, "You keep it," the seller can't just recalculate based on the total provided by the customer.** According to the BOE, the seller has to give the entire excess to the state for it to misspend. What's really sick is that these people think they are entitled to this stuff.

* 07 FFLs will recognize the deadly 50th gun under FAET from the perversely named "50-Gun Exemption", even though only those making 49 or fewer guns per year are exempted.

** Yes, I know that's what would normally happen. That doesn't stop the state from dictating an absurd policy that benefits it at our expense.

[Dvrjon]

Having run a couple of side businesses, I would:

Get the resell license. Sometime, somehow, someone will leave their gun. They won't have the money to pay you; they might be going through a divorce. Whatever. You have the gun you don't need.

Get the equivalent of "errors and omissions" insurance. It will come in handy when you say, "oh, ****, and your drill punches through something it shouldn't.

[lugnutwrench]

stitchnicklas, have you checked out the sticky threads in this section? There's a lot of good info in those as well....

[stitchnicklas]

stitchnicklas, have you checked out the sticky threads in this section? There's a lot of good info in those as well....

thanks..i am aware of those...

just wanted add input