NFA "Club" Holding Licence?

[Beretta686]

I currently own several NFA items in a trust, which works great since I made some friends "trustees" who can babysit my toys while I'm hanging out in the desert.

However a devious idea popped into my head about how me and my buddies can own post-86 machine guns (particularly a Glock 18) and I'd like some feedback if this would work.

1. Create a Corporation with a Class 3 FFL and use it as a transfer dealer and actually do transfers for MGs, gunbroker, etc
2. Set your friends up (for a small fee to cover yearly taxes) as salesman/representatives so they can take possession of Class III items owned by corp (which is allowed for Corporations), especially the Post-86 MGs.
3. If your friends want a toy, get your local PD (who you graciously allow to shoot) to give you letter wanting that toy and you simply buy it.
4. You keep the FFL current and your "Salesmen" keep their toys as their own and just help you pay renewal taxes.

In THEORY would this work (assuming you set the Corp up properly, etc, etc and not taking into account human factors, etc, etc)?

Thanks in advance!

[VUPDblue]

I don't know how long ago you went with the Trust method, or what state you are in, but with a simple Revokable Living Trust, only you or you and your spouce can be trustees. The NFA branch has been really scrutinizing trust documentation lately and they have been kicking back hundreds of applications because of improperly prepared trusts which very probably would have been approved just a year ago. When I did my first transfer into my trust, they only wanted the Certification of trust. On my next one, they wanted the complete Declaration of Trust. I just sent one in in January and they now want the Cert. of Trust, the Declaration of Trust and the Schedule A. What is legal has not been very closely dictated by BATFE as far as trusts as an ownership vehicle for NFA items. It could be a slippery slope if your trust was ever shown to be invalid. If you had it setup by a competent attorney you may be OK. If you used Willmaker or somesuch, your friends could very well be in illegal posession of your NFA items.

You are not the first one to think of your scenario for owning posties. In theory, that may work. In actuality, you would probably get busted. The SOT is $1k per year (it may be more now, I don't know the current figure) your FFL would be maybe $500 per year and your corporation license is also a yearly fee. You would have to do quite a few transfers to pay for the licenses, and without an inventory to sell, how exactly would you get customers? BATFE has had their panties in a bunch in the past because individuals have tried this method for owning posties. You could be faced with a charge of tax evasion. If you want to go into the C3 business, do it, but if you are only driven by a desire to build your own collection, you really shouldn't.

[DonR101395]

Download a copy of the NFA manual. It specifically addresses your "scenario". They refer to it as tax fraud. Could you do it and get away with it for a while. Probably, but is it worth chancing? Especially after you spelled out your scheme on the internet
FFL $200 for 3 years $90 renewal
SOT $500 if you have under $500,000 in sales per year
Corp whatever your state charges, in FL $150 a year I believe is what I pay.

If there is a scam to skirt NFA items taxes, they have seen it. IMO the payout isn't worth the risk.


YMMV

[Beretta686]

Hmmm....... Thanks for the heads up about the trust I'll have to do some research. I did my trust with Willmaker so it's not some high-speed low drag thing.

About the getting the Class III:
The dealer I use here in Texas is a doctor who does it out of his house and owns lots of Post-toys as "samples"; who basically got into being a dealer just to have cool toys. All he does is transfers and ATF is cool with him being an MG dealer. So just having the FFL is doable as long as your doing transfers, which I'd want to do.

IIRC the fees for Class III are a regular FFL plus $500 a year if you do under 500K in business.

All the major manufactures and many larger dealers surely have guys (without personal SOTs) who go out and demonstrate MGs to govs & PDs. I wonder if there is a threshold for what a "proper" salesperson in ATF's eyes would be?

Please keep in mind this is strictly a theoretical exercise.....

Thanks again for your advise!

[David Hineline]

If you want to run it as a business your plan works fine, but right off the bat you are talking about doing it just to have cool toys. Once you change your mindset you will have no problems. It's not about personal toy or toys for your friends.

[douglasschuckert]

This topic is in VERY DANGEROUS waters!

Dood, you're talking trouble. Serious, serious, serious, trouble.

Do the BUSINESS for you, and leave your friends the HELL OUT OF IT. Don't assume liability for their fu*$-ups. If They inadvertently do something stupid (and sooner or later someone will), your corporation will go to [color=#FF0000]█[/color][color=#FF0000]█[/color][color=#FF0000]█[/color][color=#FF0000]█[/color][color=#FF0000]█[/color] over-night & with a QUICKNESS, AND if you dont do this COMPLETELY correctly, you could be facing jail time alongside your friends.

Your friends are all capable of establishing their own trust for NFA ownership. If they want FA's but can’t afford transferables then let them establish their own business/FFL/SOT, and get themselves in their own success/trouble with it. An entry level subgun only costs about 2:5k. My MAC 10 full auto cost me 4.5k and it came setup in .45/9mm/& .22LR. & it had a suppressor with it. Hell, it will cost WAY more than that to setup a successful business.

On top of that, all it takes is one SOT out there doing things inappropriately, (trying to skirt the system in place for genuine businesses, people in it to make a living), to further make things harder for the genuine businesses out there! Do us all a favor and do not begin a SOT unless you are absolutely doing this for you and for you to make money, and ONLY THEN when you know the rules/requirement/procedures/etc..

Research your role and know that if you have employees there are so many requirements that you will have to meet in order to be completely legit that it will make your head spin. There’s the rule of double-taxation (you match the taxes paid by your employees), you assume liability for your employees mistakes, then for them to keep NFA under corporate auspices they MUST be officers, and that holds a whole new set of risks... You CANNOT have employees that you don't pay.. That is illegal as well.

Generally speaking it is not a smart thing, business sense wise, to go into business with friends or family. Inevitably every boss must make decisions for the better of their company that will cross the wishes of the friends/family and it could cost you more than you want to pay. It’s all consuming. Physically, monetarily, and meta-physically.

If you do, do this, however textbook legal you may be, you are assuming some very, very, very real liabilities. You could be in for more, ultimately, than you are aware of.

Keep in mind the BATF&E make up rules as they go along. Every rule that they’ve ever established, can and at one point or another have been changed or “interpreted” into something completely opposite to what the law actually says. AND THEY GET AWAY WITH IT!!!

If you need more proof, look no further than these very forums and those of others for example after example to the depths of where our BATF&E have gone. Research what actually happened at Ruby Ridge. However extreme the example is, the point is it did happen, and the agents envolved still go home to their families.

To add insult to injury not only do you HAVE to know the federal requirements (and as a dealer or manufacturer there are MANY) you must also know the state requirements as well.

Watch your 6 my friend. The BATF&E and society in general will always be on your heals to shut you down. Knitt-picking the **** out of everything you do. If you so much as give them a fraction of a inch to wiggle their way in, they will take that small mistake and tune it into a huge catastrophe... for you, and I can promise you, you do not have a friend that will go down willingly with you (I know I dont). You're talking about a game that will 1. take away your freedom for 10:20 years, 2. Cost you more money than most people's home values, 3. Destroy every relationship you have, 4. Take away your right to vote, and 4. NEVER again will you ever own or touch a real firearm.

Just be careful. No one here on this board wants to see you get into something that could be over your head or see you do something stupid. This is very much in protection of our own 6. Because all it takes is 1 person to screw-up badly enough for the laws to change and take our current freedoms away. Remember you're not just risking yourself, but the livelihoods of SOTs that are in this for a living and not just the "fun factor" of it.

Please, we beg you, be careful and VERY thoroughly weigh your options and decisions before committing to something...

You know the reason why C2 SOT's can no longer make machineguns for R&D? It's due to all the numb-nutts out there that got their FFL/SOT for the fun-factor and made all sorts of FA weapons just to have them. Now an SOT must make them to sell... Its actually heavily frowned upon by the BATF&E to construct one unless you already have the contracts for sales in hand....

For God's sake man, be smart and very carefully weigh your options and don't do things just because you want a machinegun.....

Your plan and thoughts may seem simple by paper, but what you are describing here will take more planning and knowledge of the rules and requirements in place than you may be aware of.

To add to what DonR101395 has said.. Your FFL will cost you a TON (depending on type), then your business licence depending on your county will be anywhere between $50.00 and $200.00 per year, then you have the corporate fees. Typical LLC's will cost about $200.00 to construct and another $180 or more per year to maintain. A chapter 'C' or 'S' corporation will cost you bootles as well. At least a grand to construct and God only knows how much per year... then theres the CPA fees for end of year taxes (you WANT a CPA to do the taxes)... Be ready for some real head aches... My company took a LONG time to plan, and it still is hard as hell. Im in Florida and my LLC costs me about $185.00 a year, my business licence varies from year to year and then I have to keep VERY CLOSE track of my sales tax. My state wants their piece of the pie and so does the county, and then the city... it sucks. Be it a mental exercise, or the beginnings of an actual plan, you can do this! You CAN do this well! It's risky as hell, but the fun factor is WELL WORTH it!

[Beretta686]

Hmmm...... Well I think that pretty much sinks my idea. I think I'll just stick to my MAC-10 for my FA needs. Thanks for the feedback!

[Hkmp5sd]

Even if your plan worked, for post-86 dealer samples you need a letter of request from a Law Enforcement/government agency requesting a demonstration for each MG they may wish to purchase. Those letters aren't the easiest thing in the world to acquire.

[douglasschuckert]

MP5.. How right you are!!! The demo letters (depending on local) are very hard to get. In my local area the CLEO signes demo letters for stuff thats cool. He's an NFA shoot himself and signs letters for dealers that want the new toys.. It gives him a chance to shoot all the new toys and not have to pay for them... Most places it is extremely difficult to get the CLEO or sign that piece of paper.

One could always become a C2 SOT and build all the post samples he wishes (given they are sold on a regular basis... just to have them or make for R&D doesn't cut it any more with the ATF).