Considering some work on the side- need help...

[Ronin13]

So my brother and I had this real in depth conversation over the past two days and I think this is a pretty genius idea. He and I have been considering getting a house together for some time- yes, own it, not rent. After we make the purchase he wants to apply for his FFL so he can deal in firearms and probably make a career out of it. I have already expressed my desires for a career, but as far as side work, I would love to get some experience/instruction in being an AR platform armorer (note: not a gunsmith- I have no desire to machine anything, and I'd rather not compete with Bert [Beer]) and had a few questions about this. If little bro does get his FFL and starts selling weapons, if I take a multitude of parts from different companies and build ARs (thus making a frankenrifle), what are the grounds for selling these via his FFL? Can I get base lowers and have them stamped with some sort of new name? Or would I have to get my FFL and perhaps even take some gunsmithing courses? How would that work legally, and practically? I'm not talking about building from blocks of metal, I'm talking already built individual components of a rifle, and taking some of the best parts (IE: Geissele triggers, MAGPUL grips, BCM BCG, etc.) and combining them into a custom rifle. Am I way off and can only sell these as whatever the receiver is titled as? Are there bare bones, unmarked, stock lowers and uppers that are legal (both in terms of gun laws and copyrights) to stamp with my own brand or whatever? This is just throwing some ideas around on a side hobby for myself, and I plan on taking classes to become either certified or otherwise educated in complete dismantle and rebuild of AR components and parts. Any help on where to go for that?
ETA: Also possibly looking into doing AK platform as well...
Thanks.

[J]

You would have to get a type 07 FFL (manufacturer), keep it current each year, and pay the Dept of State the $2500 ITAR registration every year. You will need to incorporate in some way, LLC, S-Corp, C-Corp.

You should also be looking in to some hefty insurance policies. Both liability and E&O. If you assemble it, and something happens you can bet on getting sued.

You should also check the HOA out wherever you are looking at houses. If they disallow operating a business at your house, you aren't allowed to get an FFL to a business addressed there.

[Ronin13]

You would have to get a type 07 FFL (manufacturer), keep it current each year, and pay the Dept of State the $2500 ITAR registration every year. You will need to incorporate in some way, LLC, S-Corp, C-Corp.

You should also be looking in to some hefty insurance policies. Both liability and E&O. If you assemble it, and something happens you can bet on getting sued.

You should also check the HOA out wherever you are looking at houses. If they disallow operating a business at your house, you aren't allowed to get an FFL to a business addressed there.
Thanks for that J... I have looked into the operating a business out of the house- a little more for our homeowners ins, but we can roll in a BOP as well... and seeing as how I work in insurance currently I do know all about liab and E&O being mandatory. So I would need a manufacturer's FFL... that's one of the things I was wondering. So as far as the FFL side goes, you pretty much answered every question I had! Thanks! And searching around, I have found some no-logo lowers, but what is the legality (such as from Mckay) on stamping my own logo on it and selling it as a "XXXXXX Custom Rifleworks" weapon? <Aside from the FFL part, which J covered.

[sniper7]

Pretty much what J said. Check local zoning as well because there are restrictions on home based businesses unless the zoning allows. HOAs are an issue. Check with the local LEO as well. Maybe talk to another FFL in the area although he may not want to help the competition.

You would be better off selling the stripped lowers only or complete factory rifles with warranties.

Think about taxes and look into write offs for the business.

With the house there are also restrictions if you receive money from Obama to get into a house if you start a home based business.

Then last you AND especially your brother need to take a step back and think about their business partner and see if they will be reliable and put in the required effort to make it a business and not just a hobby. Maybe even talk to your dad about running a business and if a partner is a smart idea...especially if it is family.

[J]

Once you have the 07 FFL, and the ITAR done and paid, you can get unmarked lowers and then stamp your logo, company name and location (city and state) caliber and serial number in to them. They must have the above stamped before you can sell them.

[DangerLee_Industries]

I've been going through the process in last 2 weeks. Shoot me a pm if you have any further questions I may be able to help..

[Ronin13]

Once you have the 07 FFL, and the ITAR done and paid, you can get unmarked lowers and then stamp your logo, company name and location (city and state) caliber and serial number in to them. They must have the above stamped before you can sell them.
Oh that's it... wow... So the ITAR and 07 FFL process is probably the biggest, and most expensive hurdle.

I've been going through the process in last 2 weeks. Shoot me a pm if you have any further questions I may be able to help..
Awesome, thanks, but we're still in the planning stages- we've both talked about getting our FFLs for about 3 or 4 months, but now he's seriously considering it. But we're not quite as far along as you yet. If I have any questions as time goes by I'll definitely give you a shout. [Beer]

[RCCrawler]

Your brother shot himself in the leg, I'm thinking an FFL is a little too advanced for him.

[jhood001]

I can't comment on the FFL business, but I would recommend you take a very serious look at purchasing a home with him. Generally speaking, purchasing a home with a friend or family member is a poor choice if it will be in both of your names. It is far better for one of you to purchase in your own name and split the mortgage payments with the understanding that any profits made from selling it in the future are split.

It isn't a matter of trust, so much as people's lives change. One of you could decide to want to move away and want to sell while the other wants to stay. One of you could fall in love and want to move your significant other in. The market could take another dive and you could both be upside down on the place and one of you would want to sell for a loss while the other wants to live in the home indefinitely. Way too many variables.

I only mention this because I have seen two friends go through it and it landed them both in situations that were very difficult.

[Danimal]

You know I have to say honestly I have thought about everything that you have brought up as a business possibility and what it comes down to is that you have to be very good at paperwork. You will be doing way more of that than building rifles for years before you ever see a profit. The laws with this type of stuff are very complicated, they got that way through decades of litigation between lawmakers and lobbyists like the NRA. Both are fighting for an edge and it makes it very complicated if you want to get into the type 07 FFL world. I know people that do it, but they had a great deal of financial resources at their disposal to get everything up and running the right way. They had to hire lawyers to research their methods and their business model before anything was even purchased.

If you are going to buy a house to do all of this in, there are a ton of things that you need to look into regarding zoning, covenants, county laws and regulations, and much much more. To work from home uncle sam needs his cut so there are a ton of rules in place to make sure that you are operating within tax laws.

I am a very organised person, and I am very good at paperwork but after looking into what is required to run a business of this type I have abandon the idea. You will need to devote 100% of your time to running the business just to break even. It is not a side job kind of a thing. If you just wanted to run an FFL from home that is one thing, and you could probably do it offering cheap transfer services for people and running a small business that buys and sells new weapons. But beyond that I would say take baby steps into the industry and feel out the laws before diving in.

[Ronin13]

I can't comment on the FFL business, but I would recommend you take a very serious look at purchasing a home with him. Generally speaking, purchasing a home with a friend or family member is a poor choice if it will be in both of your names. It is far better for one of you to purchase in your own name and split the mortgage payments with the understanding that any profits made from selling it in the future are split.

It isn't a matter of trust, so much as people's lives change. One of you could decide to want to move away and want to sell while the other wants to stay. One of you could fall in love and want to move your significant other in. The market could take another dive and you could both be upside down on the place and one of you would want to sell for a loss while the other wants to live in the home indefinitely. Way too many variables.

I only mention this because I have seen two friends go through it and it landed them both in situations that were very difficult.
I'm buying myself, in my name, and all that- I'm getting a VA home loan, and only I can apply on it- so after the purchase we're splitting the payments and all that, but the house for all intents and purposes will be in my name. [Beer]

You know I have to say honestly I have thought about everything that you have brought up as a business possibility and what it comes down to is that you have to be very good at paperwork. You will be doing way more of that than building rifles for years before you ever see a profit. The laws with this type of stuff are very complicated, they got that way through decades of litigation between lawmakers and lobbyists like the NRA. Both are fighting for an edge and it makes it very complicated if you want to get into the type 07 FFL world. I know people that do it, but they had a great deal of financial resources at their disposal to get everything up and running the right way. They had to hire lawyers to research their methods and their business model before anything was even purchased.

If you are going to buy a house to do all of this in, there are a ton of things that you need to look into regarding zoning, covenants, county laws and regulations, and much much more. To work from home uncle sam needs his cut so there are a ton of rules in place to make sure that you are operating within tax laws.

I am a very organised person, and I am very good at paperwork but after looking into what is required to run a business of this type I have abandon the idea. You will need to devote 100% of your time to running the business just to break even. It is not a side job kind of a thing. If you just wanted to run an FFL from home that is one thing, and you could probably do it offering cheap transfer services for people and running a small business that buys and sells new weapons. But beyond that I would say take baby steps into the industry and feel out the laws before diving in.
Interesting perspective. Of course we're gonna start small- it's not like I'm going to jump in and hope to be the next Wilson Combat or Dan Wesson... [Coffee] I was thinking of only building like 5-10 rifles a year, but for the most part work on selling and easy transfers, like an "open on weekends" type of deal. Just a simple side small business, we'd both keep our day jobs. Wouldn't a type 07 FFL make it legal so I could sell but leave the possibility open for manufacture when I get good at it?

[colorider]

Ask yourself , what is going to set us apart from the competition. Why will customers choose to buy from us and not from others? Are people going to make the drive to evergreen? Pretty simple business plan stuff, but also the most important.

[jhood001]

I'm buying myself, in my name, and all that- I'm getting a VA home loan, and only I can apply on it- so after the purchase we're splitting the payments and all that, but the house for all intents and purposes will be in my name. [Beer]


Awesome. The way I read it made me think you were going in on it together. Congrats on your future home purchase!

[BPTactical]

When you enter into the 07/Manufacturing side you enter into another world as far as liability.
No thanks
Also, listen to Jhood. He is wise.
Joint ownership of anything is a quick way to destroy a relationship.
Never let money come between relationships.

[ChunkyMonkey]

I think you need to think this through. How much mark up do you need to move a franken-AR w/ ease (no marketing budget etc)? $100? $200 per rifle? You have to sell 20 rifles just to make a couple grands. The profit margin to liability/cost and time you must put into this don't add up. DPMS basic carbine is $600 at walmart - comes with factory warranty. If you decided to move forward, the only value I see is personal start up business experience which can be priceless. Good luck w/ whatever decision you make.

[dwalker460]

I am actually in a similar sort of boat. I have about 1000sqft of showroom/office space that needs to generate some sort of income, and I have seriously considered setting up a gun parts/accessory etc. shop up front. My issue is I already have a lot going on, and there is just no way I can take on another project myself. So the only outlook for me is to either find a partner who is just about ready to go and needs space/capitol/etc. or to add budget and hire on employees/managers/etc..
I cannot concieve of a way it would work out that I would try and do something out of my garage or home, just too much downside with very little upside.

[Ronin13]

When you enter into the 07/Manufacturing side you enter into another world as far as liability.
No thanks
Also, listen to Jhood. He is wise.
Joint ownership of anything is a quick way to destroy a relationship.
Never let money come between relationships.
Yeah, I'm checking into that, as far as how exact and precise things need to be and all that- I would probably only build with full custom lowers and get the barrel, gas block, and tube as one piece to attach to the upper (since this is where I've heard the majority of any screwups go catastrophically wrong) and go from there.

And indeed, Jhood is good, Jhood is wise... [Beer]

[dwalker460]

I'm buying myself, in my name, and all that- I'm getting a VA home loan, and only I can apply on it- so after the purchase we're splitting the payments and all that, but the house for all intents and purposes will be in my name. [Beer]

mmm I see this as a recipe for drama myself. Lets say he gets involved with some girl (or guy, I dont judge) and decides to move out and now your the only one making those payments? Or how about if after 5 years you decide to sell and or cash out whatever equity there is, and he has helped make all these payments, what then? I can see a lease or rental arrangement, but only a very small percentages of families can actually run a family business, or have any monetary dealings and it not affect the relationships.


Interesting perspective. Of course we're gonna start small- it's not like I'm going to jump in and hope to be the next Wilson Combat or Dan Wesson... [Coffee] was thinking of only building like 5-10 rifles a year, but for the most part work on selling and easy transfers, like an "open on weekends" type of deal. Just a simple side small business, we'd both keep our day jobs. Wouldn't a type 07 FFL make it legal so I could sell but leave the possibility open for manufacture when I get good at it?

The problem I think your ignoring is that you will spend more in insurance, fees, etc. than you can realistically make selling 10 rifles a year, and it will be a very serious headache and time commitment. I think if you want to "get good at it" you need to go work for someone in the business. I get that the trend with young people these days is to just study a bit on the internet then go out and open your own shop because "I can do it as good, and for less", but the reality is you should go out and get experience, actual practical experience, BEFORE you make a commitment of time and money that has serious repercussions for each mistake you make.

[Ronin13]

mmm I see this as a recipe for drama myself. Lets say he gets involved with some girl (or guy, I dont judge) and decides to move out and now your the only one making those payments? Or how about if after 5 years you decide to sell and or cash out whatever equity there is, and he has helped make all these payments, what then? I can see a lease or rental arrangement, but only a very small percentages of families can actually run a family business, or have any monetary dealings and it not affect the relationships.



The problem I think your ignoring is that you will spend more in insurance, fees, etc. than you can realistically make selling 10 rifles a year, and it will be a very serious headache and time commitment. I think if you want to "get good at it" you need to go work for someone in the business. I get that the trend with young people these days is to just study a bit on the internet then go out and open your own shop because "I can do it as good, and for less", but the reality is you should go out and get experience, actual practical experience, BEFORE you make a commitment of time and money that has serious repercussions for each mistake you make.
We've talked about the house thing for a while now- and we've explored several options so we'll figure that out, no worries. As for the other part- I'm talking about building 10 rifles a year to start out- as far as selling we're hoping to actually at the very least break even by the end of the second year... I have a feeling ammo will be the big income maker though. I would love to get some experience and all that, but do you know of anyone who is hiring? I'd love to work at BluCore, especially after I get my NRA Instructor Cert, but it looks like right now most of the shops aren't hiring at the moment. But yes, that's some wise advice, experience before commitment- we're not planning to do this anytime real soon, we're just bouncing ideas around right now.

[nynco]

You also have to consider the tax on a manufactured fire arm vs building. There could be a way around that depending on whether you build to order and make 2 separate payments. One for the lower, and one for all the other parts.

[SuperiorDG]

Why someone would put themselves through this hell I often wonder.

[J]

One thing to look at from a purely fiscal sense...

Your IATR is $2500 a year. You only need it if you are manufacturing. So you need to make $250 on each rifle to cover the IATR. Otherwise you are paying for your IATR from revenue you have earned on other facets of the business that don't even need the IATR. Then you need to cover everything else... warranty claims, insurance, etc.

Tough business to do small.

[dwalker460]

When I wanted to learn about racing cars, I literally went and volunteered with any shop or team that would put up with me. Swept floors, went and got lunch, held this and toted that. Little by little my knowledge and skills grew, and I was actually paid to show up. I believe that to be really good at something you have to suffer for your art, and I went to where the best were, and learned from them. Sometimes that meant working night jobs so I would be free during the day, sometimes that meant working for almost nothing, but I learned more about my craft than any 10 of my peers, and thats no lie. Without bragging, there si nothing I cannot do with a race car, nor any kind of race car- be it Porsche (my actual background) Mazda, GM, road race, drag race, dirt, off-raod- doesnt matter I can take a pile of tubes and some parts and turn it into a competitive car. Most of the true masters of thier craft- be it cars or guns or whatever, learned first, opened business later.

[Ronin13]

When I wanted to learn about racing cars, I literally went and volunteered with any shop or team that would put up with me. Swept floors, went and got lunch, held this and toted that. Little by little my knowledge and skills grew, and I was actually paid to show up. I believe that to be really good at something you have to suffer for your art, and I went to where the best were, and learned from them. Sometimes that meant working night jobs so I would be free during the day, sometimes that meant working for almost nothing, but I learned more about my craft than any 10 of my peers, and thats no lie. Without bragging, there si nothing I cannot do with a race car, nor any kind of race car- be it Porsche (my actual background) Mazda, GM, road race, drag race, dirt, off-raod- doesnt matter I can take a pile of tubes and some parts and turn it into a competitive car. Most of the true masters of thier craft- be it cars or guns or whatever, learned first, opened business later.
That is true... I guess this does require a lot more thought. Unfortunately there's really nothing that I can do in this case to learn- it's basically 90% selling the guns, and about 10% (at first) just putting ARs together- something I know how to do currently, just not on a mass scale (meaning I can replace my trigger just fine and take the weapon down for a complete clean). I'm not sure how productive, mainly due to distance, it would be to go hang around Bower's all day and volunteer....