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IOI Communication
Business Entities
| Question | Answer |
|---|---|
| Name the types of business entities recognized as “persons” for purposes of the firearms and explosives laws. | • Individually owned • Partnerships • Corporations • Other (LLCs, associations, firms, societies) |
| Explain why a trust is not eligible to receive a license or permit. | |
| Describe changes in the business structure of a licensee or permittee that require the filing of a new application for license or permit | |
| Describe changes to a continuing business entity that require the filing of notice to ATF. | |
| What is the form for Application for Federal Firearms License? | ATF Form 7 |
| What determines business structure? | State law generally dictates the forms of businesses which may lawfully operate in a particular state, and what requirements must be met for a business to be formed or operated. The applicant must select the nature of the business for which the lice |
| Individually Owned | •A business owned, controlled, and operated by one individual. • Owner has unlimited liability for business debts. • Income attributed to owner at individual tax rates. •Terminates upon death, incompetence, bankruptcy, or sale. |
| Partnerships | A partnership is a voluntary association of two or more persons who jointly own and carry on a business for profit. The most common forms of partnership are: -General Partnerships -Limited Partnerships -Limited Liability Partnerships |
| General Partnership | • The business is owned, controlled, and operated by two or more partners who are co-owners and who share in the management and profits of the business. • Agreement can be oral or written. • Joint and several liability partnerships, as an entity can |
| 27 CFR 478.55 | Relates to the death and insolvency of a partner |
| Limited Partnership | • Formed by two or more partners, with one (or more) general partner plus one (or more) limited partner. • Limited partners generally contribute money or property but do not take part in controlling the partnership. • Limited partners are investors |
| Smith Explosives, Inc. holds a permit as an explosives user with Joe Smith as the sole officer/director. Joe is killed in a vehicle accident while driving to a job. Can Mary Smith, Joe’s wife, continue to operate as Smith Explosives, Inc.? | Because corporations are separate legal entities from the individuals who run them, Joe’s death does not trigger a right of succession. However, Mary could be added to the corporation which retains its permit. |
| Joe Smith holds a firearms license in his own name. After 20 years of operating, Joe wants to retire. Bill Doe buys Joe’s business, including the building and inventory. Does Bill need to apply for a license? | Yes. Joe cannot transfer his license to Bill. Bill is a different “person” therefore he needs to apply for his own license. |
| Joe Smith holds a firearms license in his own name. His store becomes very successful, and Joe’s attorney tells him he needs to protect his assets by incorporating. Joe files with the state to become Joe’s Guns, Inc., with Joe as the sole officer. Is | If the business intends to operate as a corporation, then a new license is required as the corporation is a different “person” from Joe Smith the individual. |
| Joe Smith holds a firearms license in his own name. The sign outside his business as well as his sales receipts say “Joe’s Guns.” Is Joe’s Guns required to have a license? | No. Joe’s Guns is simply a trade/fictitious name for the business operated by Joe as an individual. An IOI should confirm, however, that state rules for use of a trade name have been met. |
| Joe Smith and Mary Smith hold a license as an importer of fireworks. Following their divorce, Mary decides to leave the business, still operated by Joe, to start her own business. Would Joe or Mary need to file a new application to import explosives? | Yes, both would need to seek new licenses. The partnership cannot transfer its license to either Joe or Mary. Each would need a license to operate their respective explosive businesses. |
| Joe Smith and John Doe hold a firearms manufacturer’s license. After a year of successful operation, Big Guns, Inc. financially invests in their business and shares in the profits, but has no plan to buy them out. (1) If the license is issued to Joe and | (1) If the license is issued to Joe and John, what type of business is it? Partnership (2) What effect would Big Guns, Inc. investment have on the licensee? Big Guns, Inc. would become a new partner requiring a new application for license |
| Joe Smith holds a permit as an explosives user. Joe is killed in a vehicle accident while driving to a job. Can Mary Smith, Joe’s wife, continue to operate using Joe’s permit? | Yes, as a surviving spouse, Mary Smith “steps into the shoes” of the existing permittee and may continue operations on the existing permit provided she properly notifies ATF. |
| John Smith holds 60% of the stock in Really Great Guns, Inc., the remaining 40% divided between John’s children, Bill and Mary. John decides to sell his stock to his brother, Joe. Because Joe now has control of the corporation, is a new license requi | No, because the “person” holding the license has not changed. This would be a change in control that would require notice to ATF, and a new Form 7 upon renewal. |
| What are the hallmarks of an individually owned business? | • Owned, controlled, operated by one person • Unlimited liability •Termination on death or sale |
| What is a partnership? | A voluntary association of two or more persons who jointly own and carry on a business for profit. The most common forms of partnership are: • General Partnerships • Limited Partnerships • Limited Liability Partnerships |
| What is a corporation? | A voluntary association organized and recognized by the law as a separate fictitious person. |
| When would a change in business structure require filing a new application for license/permit? | When the “person” holding the license has changed, such as by sale, incorporation, or merger. |
| When is notice required to be given to ATF in relation to a change in licensee/permittee operations? | • Change of control (actual or legal) • Continuing partnership • Right of succession • Change in address or trade name |
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angel1225
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