Query: PA Requirements For LLC / NFA

[Fudmottin]

I've been doing some thought experiments on the benefits of setting up an LLC for the purpose of acquiring or manufacturing NFA items, particularly silencers. The logical type of LLC would be a Single Member LLC. The articles of organization would have to be written to justify LLC ownership of NFA firearms. The single member, being myself, would need permission to be in possession of company owned NFA firearms.

This makes filing a Form 1 or 4 a much simpler process.

Fine. So what does PA require of an LLC? For example, I would use my home address. How do I know I can operate an LLC out of my home? What form would the articles of operation take? What about the operating agreement? What about adding members?

What am I forgetting?

And now for another interesting possibility. Lets say I have the ability to manufacture a suppressor. The logical way to do this is on a Form 1, paying a single $200 tax for that suppressor. However, if I have what I think is a good design, I might want to become a manufacturer. I believe that is a class 2 SOT.

If I can actually sell cans, then the tax is worth paying. I just need to call the BATFE NFA branch to have them send me the application packet. I have no idea what all is required for that. The one thing I do know is that I must not be a prohibited person. The logical entity to be the manufacturer would be the LLC. Is anyone here operating with a manufacturer's FFL? How is that to get setup?

My understanding is that a manufacturer can possess post-May86 machine guns. The only down side is that they must be surrendered when SOT status is lost, so the are rented rather than owned. Also they can only be transfered to law enforcement or military agencies or other class 2 SOTs.

What am I forgetting?

I'm ultimately talking about creating an LLC as a real business rather than simply a piece of paper for getting NFA toys. But it will have to start out as a piece of paper.

PS: I noticed that PDF versions of the Form 1 are currently not available on the ATF site. The Form 7 is the FFL application which also needs to be ordered as hardcopy rather than downloaded.

PPS: At what point does a tube become a suppressor? Is it before there is some provision for attaching it to a firearm?

[jofreder]

The LLC part is easy. You can find any number of online sources to create a business entity. I used http://www.bizfilings.com/ to incorporate my business, They gave me all kinds of paper work for the business, name search, 2000 stock certificates, and IRS form filings all for about $600. You should contact your local ( City/Town) government to see if you can run a business out of the house, probably fill out an application. It may depend on if you have customers coming to the home, parking etc... at least that is what I was told when I checked. I am in an agricultural zone so they had to let me run a home business.

The FFL stuff, well, let someone else help you with that cause I have no idea.

[mojo]

Creating and LLC is easy ... creating a "correct" LLC that I would fully trust to put NFA toys in, I would get a lawyer.

FFL info ... can't help you there.

[knight0334]

As mojo above said, get a lawyer. If you're considering manufacturing of firearms and NFA - you got alot more to consider than a C&R or even a dealer licensee would.

You'll have to considered local ordinances on zoning. If your locality will not allow a business in a residential zone then chances of getting a FFL + SOT start dwindling very fast if you intend to use your own home. Some localities may allow sales type businesses, but not manufacturing from a home. If zoning isn't a problem you'll need a business license. Publicize and file new fictitious name(s) too..

You will need a state firearms dealer/manufacturer license. Federal and state tax ID's for income, sales/use and excise taxes. Liability and other insurances is highly suggested. A lawyer on retainer who caters to firearms law, both criminal and civil, would be a smart idea too. Someone to get your accounting going properly too to make sure your taxes are paid correctly and on time.

A facility to randomly test your products should be considered too - kinda hard to do that inside a residence three blocks from an elementary school.

Probably just scratched the surface of all the things to consider. I highly suggest sitting down with a lawyer, pay his/her fees, and have them help with everything.

About the machineguns, while SOT's are a sly way to possess the post May86 MG' - you must realize that the purpose of possession is to sell to LEO's and military. If the ATF thinks you're using the SOT for personal use/collection you will find your FFL and SOT canceled before you know it.

[tacticalreload]

I've been doing some thought experiments on the benefits of setting up an LLC for the purpose of acquiring or manufacturing NFA items, particularly silencers. The logical type of LLC would be a Single Member LLC. The articles of organization would have to be written to justify LLC ownership of NFA firearms. The single member, being myself, would need permission to be in possession of company owned NFA firearms.

This makes filing a Form 1 or 4 a much simpler process.

Fine. So what does PA require of an LLC? For example, I would use my home address. How do I know I can operate an LLC out of my home? What form would the articles of operation take? What about the operating agreement? What about adding members?

What am I forgetting?

And now for another interesting possibility. Lets say I have the ability to manufacture a suppressor. The logical way to do this is on a Form 1, paying a single $200 tax for that suppressor. However, if I have what I think is a good design, I might want to become a manufacturer. I believe that is a class 2 SOT.

If I can actually sell cans, then the tax is worth paying. I just need to call the BATFE NFA branch to have them send me the application packet. I have no idea what all is required for that. The one thing I do know is that I must not be a prohibited person. The logical entity to be the manufacturer would be the LLC. Is anyone here operating with a manufacturer's FFL? How is that to get setup?

My understanding is that a manufacturer can possess post-May86 machine guns. The only down side is that they must be surrendered when SOT status is lost, so the are rented rather than owned. Also they can only be transfered to law enforcement or military agencies or other class 2 SOTs.

What am I forgetting?

I'm ultimately talking about creating an LLC as a real business rather than simply a piece of paper for getting NFA toys. But it will have to start out as a piece of paper.

PS: I noticed that PDF versions of the Form 1 are currently not available on the ATF site. The Form 7 is the FFL application which also needs to be ordered as hardcopy rather than downloaded.

PPS: At what point does a tube become a suppressor? Is it before there is some provision for attaching it to a firearm?

IANAL so I could be wrong.

If you create an LLC in PA for the specific purpose of purchasing / owning Class III items, then go ahead and do it. You're not operating a business so you don't need to worry about doing anything else with the LLC (taxes, employees, filings, etc.). Keep in mind that this might change in the future. Pay your fee, register your LLC, and that's it. The fee is currently $125 and you can currently do it online. You don't need an operating agreement or anything else in order to create an LLC.

If you want to make a can, you're able to do so on a Form 1... just like you're allowed to make any firearm for personal use. However, if you want to have a business selling them, you're going to need a Type 07 FFL with the SOT. The Type 07 FFL is $150 / 3-year period. The SOT is $500 / year. Getting a Type 07 FFL is no different than getting a Type 01 FFL... order the forms from the ATF distribution center (can be done online... sometimes it takes them forever to get them to you), get printed, get your picture taken, make sure your local municipality is okay with the zoning of where you're running your business, and send it off.

Keep in mind about the FAET... firearms and ammo exise tax. You make a gun, you pay 10% in exise tax. I think that ammo is 11%.

AFAIK, you're able to possess post-86 machine guns if you're manufacturing them. I don't know if you're able to possess them if they are already existing. If you're a regular Type 01 FFL with and SOT, you can't possess post-86 full auto without proof that you're buying them for a LEA or with out a LEA letter requesting a demo / sample. Not sure if this also applies for the Type 07 that you are NOT manufacturing.

I personally wouldn't mix the LLC for buying NFA items with the LLC for the FFL... I'd start a second one.

[SigForLife]

If you are going to have NFA weapons owned by a corp and possessed by members/employees, you NEED a properly drafted NFA Operating Agreement. Everyone wants to go the cheap route until their ass is in a sling and then it is everyone else's fault but theirs. It is like running Wolf ammo in a Stoner 63. Spend the money and know that if it fails its purpose, you likely have a malpractice suit; thus, it is an insurance policy also.

[Fudmottin]

I wouldn't consider doing an LLC without a lawyer. I completely agree with SigForLife. I was thinking that an LLC might reduce hassle if I wanted to experiment with multiple suppressor designs. I could test them for effectiveness at a public range until I found a design I liked. The experimental cans would simply be listed on the Form 2 and go unsold.

Contrast this to a Form 1 for each and every one.

The machine gun comment was based off of what I was reading and seemed like an extra perk. I'm pretty sure that to sell anything, I would need to either transfer to a class 3 dealer or also have a class 3 SOT myself. I would prefer to transfer through a class 3 and just hold a class 2.

BTW, this is all hypothetical at present. What I would likely do if I started an LLC would first go through a lawyer to create a correctly formed operating agreement, etc. I would not apply for a class 2 unless I had zoning permission to do small scale manufacturing. I'm not trying to become Colt or Smith & Wesson.

As far as when a tube becomes a suppressor, I found this:

"18 U.S.C. sec. 921(a)(24) "The term 'firearm silencer' or
'firearm muffler' means any device for silencing, muffling, or
diminishing the report of a portable firearm, including any
combination of parts, designed or redesigned, and intended for
use in assembling or fabricating a firearm silencer or firearm
muffler, and any part intended only for use in such assembly or
fabrication.""

This implies that a tube is a suppressor if the BATFE claims it is one. This reinforces the desirability for a class 2 in my mind.

As I said above, if I got a class 2, it would be for a very small scale operation. Class 3 dealers would be the only people I dealt with directly. The shop would essentially be a one man operation with zero impact on the area wrt traffic, parking, etc.

[mojo]

Even if your a manufacture ... are you allowed to build a bunch of suppressors for R&D and not pay tax on them?

[Fudmottin]

It's my understanding that that is the whole point of the SOT. A non-SOT would have to pay the $200 NFA tax for each transfer. A transfer between two SOTs is done on the Form 3, IIRC and has no tax.

Unsold R&D suppressors I would destroy and inform the BATFE NFA Branch.

I should probably emphasize at this point that I am looking to do all of this legally and above board. I've filled out a 4473 for every firearm I own and don't plan on changing my law abiding behavior anytime in the foreseeable future. My one and only NFA item is a suppressor in 5.56 NATO transfered on a Form 4.

[tacticalreload]

Even if your a manufacture ... are you allowed to build a bunch of suppressors for R&D and not pay tax on them?

Every one would have to be registered shortly after completion.