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Forming a LLC
#1
On another PA firearms forum I posted a detailed description of how to form a PA LLC that could acquire NFA goodies. Another lawyer on that site prompted the admins to delete the post and ban me for errors he claimed I made but would not specify. I suspect he wanted to sell what I was giving away. If you live in Philadelphia or another town where CLEO signoff is a problem, forming a LLC seems better to me than forming a trust or going without NFA toys.

My how-to is on yet another site now, and if there is interest here I will post the URL.
cgk, proud to be a member of pa2a.org since Sep 2012.
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#2
A few thoughts in this....

This is the internet. It's not a law firm that you pay thousands of dollars for. So any advice given on here should be taken with a grain of salt. Any write-up, how-to article or piece of legal advice should be considered for informational purposes only, and to help you figure out what general direction you want to go towards. I don't recommend that ANYONE uses solely an internet forum for all their legal advice. It's not gonna look good in court when you argue, "but your honor, someone from the internet told me I could do it!"

Like I said, the internet can get you going in the right direction, but make sure you have another source to back you up. You can either hire a lawyer or simply read the law for yourself. Look on the ATF and FBI websites, and see if they agree with the advice you are getting on here. But don't take everything here like it's the bible; there might be mistakes, and it will be YOU that pays for it.

Anyway, I'm starting to go off onto a tangent but my point is, it can't hurt to post your write-up for other people to see. For one, if there is a mistake, it will likely be pointed out sooner than later by another member of this forum. They can post their reasons to why it's wrong (an hopefully provide sources) and everyone else can look at the evidence and come to their own conclusions. As far as I know, at no point is the author liable for someone following their advice, especially if you write a disclaimer saying that you are not a lawyer.

So in a nutshell, I say post it.
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#3
This is a simple “how-to” form a LLC to acquire and hold NFA items

This post describes how I formed a single-member limited liability company (LLC, a legal entity which is NOT a corporation) in Pennsylvania, how I file an annual tax return with PA (no payment needed, but one must file) and why I don’t have to file a federal income tax return for the LLC. Total cost to me as a PA resident: a one-time $125 LLC filing fee and the annyual cost of a postage stamp to mail a PA tax return. An LLC was the way for me to go as I live within the City of Philadelphia where it is not possible to get a chief law enforcement officer signature on an ATF Form 4 or Form 1.

If you are not resident in PA, you may choose to form a LLC under the law of your state of residence. Regardless of where you form your LLC, you should not have any income tax cost, but every state will require that you have a location within that state where notices may be sent. If you are resident in that state you may use your address. If you are not, you may use another address in the state, including the address of a service company you pay to act as your agent in that state. The cost of a commercial agent for this purpose is around $100 annually and a web search will locate many of them. Some states also require an annual fee to keep your LLC active. In Delaware, home to many companies, the annual fee is $250. PA does not charge an annual fee, so even if you are resident outside PA you may choose to form a PA LLC and pay registered agent fees.

LLCs can be a tax-pass-through entity that for income tax purposes is a disregarded entity—all income flows through to my personal tax return. Because my LLC just owns NFA items and has no other activities, it does not have any revenues or income and therefore no income tax is payable.

My LLC has only me as a member. I made it a single-member LLC to keep it simple. The NFA-related rules on who may use or possess a short barrel rifle, suppressor or other NFA item relate to the LLC as owner just as they would to an individual as owner. The PA statute does not require that an LLC have an LLC agreement or operating agreement to spell out the characteristics of the LLC—the statute provides a set of default rules. Because my LLC has only a single member there is no risk that I will disagree with myself! Later I might admit additional members and would then write an agreement spelling out their rights, but I don’t need an agreement with myself now. If you decide to have multiple members of your LLC, you might want to consult a lawyer depending on your business sophistication.

I picked a name for the LLC that was not in use, as I checked HERE. (I used my dog’s name, and now it’s a nice way to remember him as he has passed.) I used the simple LLC formation document that the Commonwealth of Pennsylvania allows you to download HERE. Note that a PA LLC is dissolved upon the death or bankruptcy of its sole member unless you add a sentence in the certificate of organization that the LLC shall have perpetual existence. That may be desirable for you. I used my home address in PA as the registered office and struck out on the form all the inapplicable items. I mailed the form in and two days later the Secretary of the Commonwealth approved it and mailed my copy back to me. I have used the LLC as the manufacturer of a SBR (ATF Form 1) and the owner of some suppressors (ATF Forms 4).

Because when it comes to money the arms of the Commonwealth’s government talk to each other effectively, I soon got a letter from the PA Department of Revenue welcoming me to the business community and assigning a corporate account number. Every year in January I prepare and file a PA Corporate Tax Report on Form RCT-101. You might well ask why a LLC has to pay a corporate tax, and the answer is that although no corporate income tax is payable the Capital Stock/Franchise Tax is applicable, and that gets reported on RCT-101. Don’t fret, no tax will actually be payable, but you do have to file.

The annual filing requires just a few pages, most of which you can fill out on-line, print and mail. Start with the RCT-101 which you can find HERE. The instructions are in document REV-1200, so search for that on the PA web site--it seems to be hidden but a search for REV-1200 finds it. On page one of the RCT-101 complete the name, address and tax account number of your LLC in Step C and your information in Step G. On page two insert your book income as 0 for as many years as you have had your LLC. Insert your shareholders’ equity where requested (that’s the cash you provided for the purchase of your LLC-owned NFA items) and do the simple math required. Note that the valuation deduction is $160,000 as of this writing, so unless your LLC has more capital than that you will owe no capital stock tax. Pages three and four are probably blank and page five just wants some simple information in Section F. Fill in your information on page six and then print and sign on page one (not page six—that’s for a paid preparer, and why would you need that?).

You need to attach Schedule X, Rev-798, so search for that document on the PA wb site. Complete name, tax account number, tax year dates, your name and SSN. You also need to attach Schedule L. You can it by searching for Rev-860. Put the total amount of cash you have provided to your LLC on the Other Assets, Total Assets, Member’s Capital Account and Total Liabilities and Capital lines.

Finally, attach an alternative Schedule C that you would file with your personal federal income tax if your LLC had any income. Because the LLC did not have income, you file this Schedule C only with the RCT-101. The text of the Schedule C is below, and you mail it to the address in the instructions (document Rev-1200). Currently that address is: PA DEPT OF REVENUE, NO PAYMENT, NO REFUND, PO BOX 280708, HARRISBURG, PA 17128-0708.

[name of your] LLC
Account ID XXXXXX
Tax Year Ended 12/31/20XX

Alternative Schedule C of Federal Form 1040
of the individual owning all of the stock of the taxpayer (the “Owner”)

[name] LLC is a Pennsylvania single member limited liability company disregarded for federal income tax purposes. Any income [name] LLC has will be reported on Schedule C of the federal Form 1040 of the Owner. For the tax year ended 12/31/20XX [name] LLC had no income and the Owner will not file a Schedule C.


Have fun with your NFA items!


Disclaimer: Materials have been abridged from laws, court decisions and administrative rulings and should not be considered as legal opinions on specific facts or as a substitute for legal counsel. The United States Treasury Department issues Circular 230, which governs all practitioners before the Internal Revenue Service. Circular 230 requires a legend to be placed on written communications that are not otherwise comprehensive tax opinions. To ensure compliance with Treasury Department Circular 230, please note that this post is not intended or written to be used, and cannot be used, by you for the purpose of avoiding penalties that the Internal Revenue Service might seek to impose on you.
cgk, proud to be a member of pa2a.org since Sep 2012.
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#4
LLC won't be needed soon. ATF is getting rid of the CLEO signoff. Only reason it was there was because background checks in the 1930s were nonexistent. They had the CLEO requirement as a way to check if you were an upstanding citizen. With NICS and such, it's no longer required.
Interdum feror cupidine partium magnarum Europae vincendarum
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#5
Warpt762x39;13732 Wrote:LLC won't be needed soon. ATF is getting rid of the CLEO signoff. Only reason it was there was because background checks in the 1930s were nonexistent. They had the CLEO requirement as a way to check if you were an upstanding citizen. With NICS and such, it's no longer required.

I've been hearing that for years. Hope it becomes true one day!
cgk, proud to be a member of pa2a.org since Sep 2012.
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#6
It should be in effect in the next few months.
Interdum feror cupidine partium magnarum Europae vincendarum
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#7
It could still be a viable option for those who want multiple people to be able to access the firearms.
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#8
The most common reason to go the LLC route is to avoid the CLEO signature. A lot of CLEOs don't like signing off on stuff like that. When I went to give the CLEO the copies of my C&R paperwork I asked if he signed off on NFA forms. He said he had no problem signing off especially if he got invited to play with whatever toy the person got. Most of the cops in my township are gun nuts too.
Interdum feror cupidine partium magnarum Europae vincendarum
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#9
Warpt762x39;13736 Wrote:It should be in effect in the next few months.

Fron your lips/keyboard to God's ear....
cgk, proud to be a member of pa2a.org since Sep 2012.
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#10
Warpt762x39;13738 Wrote:The most common reason to go the LLC route is to avoid the CLEO signature. A lot of CLEOs don't like signing off on stuff like that. When I went to give the CLEO the copies of my C&R paperwork I asked if he signed off on NFA forms. He said he had no problem signing off especially if he got invited to play with whatever toy the person got. Most of the cops in my township are gun nuts too.

My local PD signs off, I still went LLC out of principle of not wanting to deal with that, plus I want the possibility of allowing my kids to use the toys some day. Aside from that there are several other benefits of going with an LLC, the biggest IMO being able to transfer/sell off your entire collection without paying $200 per item.
The law? The law is a human institution...
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