Switching FFL/SOT from Sole Prop to LLC-Need help

[Got Uzi]

I'm looking to switch from being a Sole Prop to an LLC with regards to my FFL/SOT, is there anything special I should be aware of, or is it just filing the LLC paperwork, getting a new EIN, then submitting a new FFL application?  Is there anything special with regards to what the LLC needs to be or is an LLC just an LLC (meaning they are technically the same)?

[Bwana]

I am a single member LLC (SMLLC) for my FFL/SOT.  ATF will ask about any zoning restrictions for your place of business.  Since you're just switching entities you should already have that.  In some states the SMLLC is a "disregarded entity".  An advantage of the SMLLC is that you can file on your personal taxes with Schedule C.  There are tax advantages to an S-Corp (especially if you're buying your own medical) but lots more paperwork to deal with.  I have an S-Corp for another business.  If I re-do mine I will be an 07/02.  I went 01/02.  More RKI can chime in.

[SGT Fish]

Does the ATF give you any special ways for transferring your inventory? Or just transfer everything on form 3s with a letter saying you are dissolving the SOT?

Are you SOL if you aren't an 07/02 that can take "no letter" posties?

[LCWDuraCoat]

I recently went through a similar process. When you file your Form 3s to transfer to new FFL, you should include a letter stating the date you plan to close out your old FFL. If you have any items that you want to sell on Form 4s, you can also include that same letter with the end date to significantly speed up the process. This is especially helpful if you have customers that don't want to wait a year. You would get the approved forms back by the end date stated on your letter which could be weeks. You must have an 07/02 if you want to keep your posties. If you don't want to keep them, this is the opportune moment to get them sold without letters. As for differences between a sole proprietor FFL and and LLC FFL, the biggest and most important difference is that when you close out your FFL for good you would have to still keep that LLC running to keep the NFA. Where as, if you had a sole proprietor FFL, everything just becomes yours personally. That can make a big difference for some people. 

[Got Uzi]

I went the sole prop route so the anything I acquired would stay mine post SOT days. Now that those days are behind me, it makes sense to put a buffer between my personal assets bs company ones. I would only plan on transferring my post sample HK packs over as those are the only post samples I really even use. I like the idea of selling off the post samples so I can clear the books and simplify things plus put that buffer in place. 

[Benjamin Tactical Inc]

I went from a SMLLC to S-Corp for tax and estate reasons last year and took the opportunity to sell off some posties.  Now I’m considering changing to a sole proprietor due to changes in IL law this year. These changes in business type are a pain in the butt because they necessitate new FEIN, new FFL, new SOT, new local zoning permit, new state license (IL), new bank accounts, new credit cards, new business cards/ad materials and new A&D book.  Before starting down that road, be sure its really necessary.

For me, changing to a sole prop is going to be absolutely necessary if the new IL AWB laws hold up to the court challenges. So unfortunately, I’ll be going thru this process again later this year.  The only difference this time is that I am not selling any posties other than maybe a couple cheap gunsmith specials.

Good luck!

Edited July 24, 2023 by Benjamin Tactical Inc

[Ryo]

Careful with that switching back and forth since some FFLs have done that on purpose to gain a profit of selling posties.. They get a bit more scrutiny.

I am a S-Corp and added a FFL07 to the license. I found interesting that everything transferred over to my FFL07 since the EIN is what the NFA items were recorded under so no need to do Form 3. I know your doing something different but just thought to mention.

[Got Uzi]

Oh I know what you are saying. I love how some do the flip flop so they can sell off their 50-100 “no law letter” post samples. 
 

Im looking more at shielding my personal assets and simply life, plus free up space and money. 

[lonewolftactical]

What are the "real world" advantages regarding LLC, S-Corp etc. in exchange for all the extra BS and paperwork for a business owner?

I know they tout this or that on paper, but when the rubber meets the road and some sleaze ball attorney figures out that your business assets aren't much and that there's much more to be had by going after you personally in a civil suit....what exactly stops them from doing just that?

This type of stuff is happening all the time. They go after a business and if there's more to be had then the civil suits start.

I'm really wondering if these legal business entities are nothing more than paper tigers when it comes to the average Joe vice a major corporation that hides behind multiple front company's and corporations and has an office full of their own sleazeball attorney's.

[MontanaRenegade86]

Is it possible to get heavy duty insurance as a sole proprietor? 

Can a lawyer draft a solid waiver document absolving you of any potential liability?

I've wanted to get my FFL/SOT for years, but it would just be a side hustle. The intersection of personal/business liability gives me pause, but I wouldn't want to screw with business incorporation BS.

Edited August 2, 2023 by MontanaRenegade86

[Benjamin Tactical Inc]

That’s exactly the risk. It would be very difficult to separate business from personal assets in the event of being sued as a sole proprietor,.  Definitely a conversation to have with your attorney.

Edited August 2, 2023 by Benjamin Tactical Inc

[Got Uzi]

What’s kinda handy is my fiancée is a lawyer and we discussed all of this and it makes sense to have it as an LLC moving forward given then way they world is anymore. 

[lonewolftactical]

On 8/3/2023 at 5:54 AM, Got Uzi said:

What’s kinda handy is my fiancée is a lawyer and we discussed all of this and it makes sense to have it as an LLC moving forward given then way they world is anymore. 

Yes, it makes sense on paper but what about in the real world when someone actually comes after you with a high power attorney and public scrutiny on their side. Once again, are they just going to go away once they realize they can't get blood from a stone out of your business and you simply dissolve your LLC and pop up next week as something else OR do they switch gears and go after Mr. Uzi personally because he has a nice house, fancy cars and other cool stuff that is worth something to them and their client.

People speak about the LLC like it's sun to a vampire = lawyer, but I'm really curious if it's really all that effective in the real world for a small business owner or kitchen table firearms dealer.