NFA ownership - Trust vs. LLC vs. Individual

jbonnette · Aug 1, 2010

I am in the process of making my first NFA purchase. Over the past week, I've been trying to determine the most advantagous way of making this purchase and many more in the future. I'd like to get input from the forum and compile a Pros and Cons of each method of ownership.

If you can think of any pros or cons, please post and I will update the list.

Individual Ownership
Pros:
- Least complicated first purchase. (No need to get a lawyer involved)
- Least expensive because there are no start-up or maintenance costs
- Upon death, NFA items can be transferred to your "heir" tax free with a ATF Form 5 (5320.5)
Cons:
- Must get fingerprinted for each NFA application
- Must get CLEO sign-off
- Only the registered individual is allowed to have access to the item. Others may use the item only in the registered user's presense.

Trust Ownership
Pros:
- Fingerprinting not required
- CLEO sign-off not requred
- Reasonable one-time start-up fee with no annual fees
- All settlers and trustees can have access to the NFA items (if the trust allows it)
Cons:
- Must submit a copy of trust with the form 4 for each purchase
- In Louisiana, the term of a trust is 20 years from the death of the settlor or the death of the beneficiary, whichever occurs last. This necessitates that all items be Form 4 transferred out or surrendered to the ATF

LLC / Corp Ownership
Pros:
- Fingerprinting not required
- CLEO sign-off not requred
- Lasts forever if maintained properly. Meaning that you can pass down your LLC and it's NFA assets to future generations without Form 4 transfers.
- Can sell the LLC along with it's NFA assets without Form 4 transfer fees (to anyone that can legally possess firearms)
- Limitation of Liability. If an "accident" occurs by an authorized user, liability is limited to that user and the LLC
- LLC can authorize individuals access to NFA items
Cons:
- Must file an annual report to maintain. Filing fee currently costs 25$ in Louisiana but could increase.
- Must file tax return
- Information about your LLC is publicly available (such as address)

Nolacopusmc · Aug 1, 2010

jbonnette said:
I am in the process of making my first NFA purchase. Over the past week, I've been trying to determine the most advantagous way of making this purchase and many more in the future. I'd like to get input from the forum and compile a Pros and Cons of each method of ownership.

If you can think of any pros or cons, please post and I will update the list.

Individual Ownership
Pros:
- Least complicated first purchase. (No need to get a lawyer involved)
- Least expensive because there are no start-up or maintenance costs
Cons:
- Must get fingerprinted for each NFA application
- Must get CLEO sign-off

Trust Ownership
Pros:
- Fingerprinting not required
- CLEO sign-off not requred
- Reasonable one-time start-up fee with no annual fees
Cons:
- Must submit a copy of trust with the form 4 for each purchase
- A trust ends after the death of the founder of the trust. This necessitates that all items be Form 4 transferred out or surrendered to the ATF

LLC / Corp Ownership
Pros:
- Fingerprinting not required
- CLEO sign-off not requred
- Lasts forever if maintained properly. Meaning that you can pass down your LLC and it's NFA assets to future generations without Form 4 transfers.
- Can sell the LLC along with it's NFA assets without Form 4 transfer fees (to anyone that can legally posess firearms)
Cons:
- Must file an annual report to maintain. Filing fee currently costs 25$ in Louisiana but could increase.
- Must file tax return
- Information about your LLC is publically available (such as address)

Very well done man.

Narco · Aug 2, 2010

Trust..

goteron · Aug 2, 2010

I fully support whatever method I arbitrarily chose when I started. I will defend it with fervor regardless of it's glaring problems.

Seriously, I prefer a trust. Easiest method for me.

Guate_shooter · Aug 2, 2010

LLC if you already have one for your personal business just add it to it and done, less headches and you can add "stock holders" to your LLC so that you have "aprooved users" if you wanted to let your older kid or brother use it for example.

At least that was the info I got last time I checked but I never went forward with any purchase.

Narco · Aug 2, 2010

pangris said:
If you go the LLC route, wouldn't you have to notify the .gov when the address the toys were kept at changed?

I guess that applies to all the options, however.

Yeppers

Change of Address: Unless currently licensed under the Gun Control Act, the registrant shall notify the NFA Branch, Bureau of Alcohol, Tobacco, Firearms and Explosives, 244 Needy Road, Martinsburg, WV 25405, in writing, of any change to the address in Item 2a.

hdfinder47 · Aug 2, 2010

Good post - looks like the LLC has some important advantages for me. Thanks for you effort.

jbonnette · Aug 2, 2010

Guate_shooter said:
LLC if you already have one for your personal business just add it to it and done, less headches and you can add "stock holders" to your LLC so that you have "aprooved users" if you wanted to let your older kid or brother use it for example.

At least that was the info I got last time I checked but I never went forward with any purchase.

If you went LLC, I would actually choose to do it separately from your business LLC. There are a few reasons for that:

-Liability -> LLCs have a limitation of liability. Say your brother is part of your NFA LLC. If he is using one of the weapons and some accident occurs. Your brother and the LLC can be sued. All assets of the LLC would be vulnerable. If the weapon was owned by you (or your trust I believe), you would have liability for your brother's actions.

-Risk of personal business failure. If your business fails, all business assets including NFA assets can be sold by debtors. Even if you have no debt, you would have to transfer all of the NFA items out to another entity or surrendor them to the ATF. I met a guy several months back who had to transfer all of his items to a new LLC at the cost of 200$ per item for this exact reason.

-Ability to sell your NFA LLC. If for some reason you decide to get rid of your NFA items, you can sell the entire NFA LLC without having to Form 4 transfer each of the NFA items out for a cost of $200 per item.

jbonnette · Aug 2, 2010

goteron said:
Seriously, I prefer a trust. Easiest method for me.

You're right, a trust is probably the best in terms of maintenance. After setup there is nothing to do (until death). IMO, the trust becomes trickier to manage upon death. At that point, you have to then be concerned with whether it is still legal to transfer NFA items and how much that costs. If it's illegal to transfer NFA items or too expensive, your posterity could surrender them to the ATF or sell them to someone that had the money if it was legal to do so.

jbonnette · Aug 2, 2010

pangris said:
The trust doesn't have to dissolve upon YOUR death - properly arranged, it dissolves upon the death of your hiers.

In Louisiana, a trust can last 50 years after settler's death or 20 after beneficiary's death. Thanks for the clarification, Pangris. Updating top post.

Richard in LA · Aug 2, 2010

In Ascension parish, Wiley signs off very promptly. I used the "traditional" way, because it was easy. My wife doesn't really care about class 3 stuff, and my son is not old enough to go on his own, so the LLC (where you can have others in possession of your stuff) was not for me.
As for after death, there is a form where your class 3 stuff can be transfered one time, tax free to an heir. I have the forms printed in my safe (along with my original F4's), just in case something happens to me.

as for the fingerprints, not a big deal, other than the hour of time it takes to get them done which is like .004% of the total time of a Class 3 transfer, which in the grand scheme of things will probably be less than the total time spent doing LLC paperwork for the rest of your life. Its cheaper too.

jbonnette · Aug 2, 2010

Richard in LA said:
As for after death, there is a form where your class 3 stuff can be transfered one time, tax free to an heir. I have the forms printed in my safe (along with my original F4's), just in case something happens to me.

Interesting. Does anyone know if you can do a Form 5 transfer of NFA items from a trust to a beneficiary?

yamatitan · Aug 2, 2010

jbonnette said:
Interesting. Does anyone know if you can do a Form 5 transfer of NFA items from a trust to a beneficiary?

Why no just amend the trust with the name of the person you want to transfer the items to?

jbonnette · Aug 2, 2010

yamatitan said:
Why no just amend the trust with the name of the person you want to transfer the items to?

A trust is not amenable after the death of the settler. Once the trust ends, all Nfa items must be transferred out or surrendered to the ATF. If your beneficiary/heir could use a form 5 to transfer out the NFA items tax free ... That would be a really good thing.

Nolacopusmc · Aug 2, 2010

I have my trustees and secondary beneficiary set up in such a way as they get "passed down" for a couple of generations.

yamatitan · Aug 2, 2010

Nolacopusmc said:
I have my trustees and secondary beneficiary set up in such a way as they get "passed down" for a couple of generations.

This is how mine is set up too.

yamatitan · Aug 2, 2010

jbonnette said:
A trust is not amenable after the death of the settler. Once the trust ends, all Nfa items must be transferred out or surrendered to the ATF. If your beneficiary/heir could use a form 5 to transfer out the NFA items tax free ... That would be a really good thing.

Mine is setup to where my mom would take over all my NFA items permanently. They wouldnt have to be transferred/surrendered unless she died. Once I get married I plan to amend that to my wife.

Nolacopusmc · Aug 2, 2010

yamatitan said:
Mine is setup to where my mom would take over all my NFA items permanently. They wouldnt have to be transferred/surrendered unless she died. Once I get married I plan to amend that to my wife.

My wife and my mom, and then to my sister. they would then have to be transeferred.

cajun 22 · Aug 3, 2010

Trust for me.

Dock Rocker · Aug 3, 2010

I have a trust here in MS, but I dont think there are any material differences between the two states other than the length of time the trust can exist. You forgot to mention one pro of the trust. If written correctly any of the trusties of the trust can possess the items owned in the trust. I have a trust in place and my brother (who can legally posses a gun) is a trustee. The language in the trust states grantors and trustees have the rite to use any items controled under the NFA. This allows my brother to have the cans while I am not around. This has also been done with employees in an LLC but I have never dont that. The down side to owning it personally is that it has to always be in your site when in use.

I trust my brother with my stuff so its no big deal. I would not recommend doing this with a casual acquaintance.

NFA ownership - Trust vs. LLC vs. Individual

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