Gun laws and legislation

We're the ideal place for homework help. If you are looking for affordable, custom-written, high-quality and non-plagiarized papers, your student life just became easier with us. Click either of the buttons below to place your order.

Order a Similar Paper Order a Different Paper


For this assignment, please summarize the following:

• Key Principles of Federal Law Applicable to Firearms Transactions

• National Firearms Act

• Concept of a Prohibited Person

Information is located here:

Chapter 1 – Gun Laws and Legislation





Shooting Sports Management

© 2021 Sonoran Desert Institute. All rights reserved. The material in this publication cannot be reproduced or redistributed unless you
have obtained prior written permission from Trade Training Company, LLC, dba Sonoran Desert Institute. 

Sonoran Desert Institute does not assume any responsibility for the use or misuse of information contained in this book.

ISBN: 978-1-945697-16-6

Rev. 6.21

Course materials and other works have been prepared by or on behalf of SDI for general informational and educational
purposes only. SDI makes no representations or warranties as to the completeness or accuracy of the information. In
no event will SDI be liable for any errors or omissions in the information contained in this work. SDI reserves the right to
change, delete, or otherwise modify the work without any prior notice. SDI does not assume any responsibility for the use
or misuse of information contained in this work. 


Chapter 1 – Gun Laws and Legislation . . . . . . . . . . . . . . . . . . . . . . . 1

Chapter 2 – Setting Up a Business . . . . . . . . . . . . . . . . . . . . . . . . 29

Chapter 3 – Promoting Your Business . . . . . . . . . . . . . . . . . . . . . . 57

Chapter 4 – Business Records and Bookkeeping . . . . . . . . . . . . . . . . 85

Chapter 5 – Appraising Firearms . . . . . . . . . . . . . . . . . . . . . . . . . 113

Chapter 6 – Trading in Used Guns . . . . . . . . . . . . . . . . . . . . . . . . 131

Chapter 7 – Selling New Guns . . . . . . . . . . . . . . . . . . . . . . . . . . .159

Chapter 8 – Importing Firearms . . . . . . . . . . . . . . . . . . . . . . . . . . 177

Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .199

Shooting Sports M



Advantages of a Business Entity or Gun Trust 9
Keeping Records 9
Transfer Between Licensees 10
Know Your Customer 11
Straw Purchase 12
Sales To Law Enforcement Officers 12
NFA Gunsmithing 15

General Questions 17
Unlicensed Persons 19
Firearms Transaction Record 23
Required Records 23
Additional Questions 25

hapter 1 – G

un Law
s and Legislation



One of the most difficult issues confronting
firearms businesses and firearms owners is the
need for fully trained, competent gunsmiths.
Unfortunately, there are many people out there,
some of them federal licensees, who claim to
be gunsmiths but have very little knowledge or
skills in that area. Gun owners often complain
that these people hold their guns for unreason-
able periods of time and, when they finally get
them back, the necessary repairs have either
been made poorly or not made at all. This is
often not discovered until the gun owner has
paid for the repairs that have supposedly been
made, forcing him into a decision on whether
it is worth the expense of taking legal steps to
recover his money or just to go to another gun-
smith and start the repair process over again.

The information in this book is current at time of
printing, since gun laws are continually changing,
it is suggested you check with the state and local
government along with the ATF to f ind current


The poor state of our economy forces many gun
owners to delay purchasing new firearms until
their finances are in better shape.
In addition, the machine gun ban of 1986 says
that private citi zens can only own machine
guns that were manufactured and transferrable
be fore May 19, 1986. As these firearms get
older, many of them will need to be repaired.
Remember, some parts of a machine gun are
considered a machine gun. If these parts break,
they cannot be replaced unless the replacement
machine gun was also manufactured before
May 19, 1986 [18 USC 922(o)].
These problems, along with the threat of more
regulation and additional laws restricting fire-
arms sales that seem to come with the public-
ity surrounding every mass shooting, may result
in the curtailment of new gun sales. Therefore,
there may be an even larger demand for the
knowledgeable gunsmith in the near future.
Existing firearms will have to be maintained,
and broken guns will need repairs, often re-
quiring the gunsmith to manufacture new gun
parts. Collectors and museums will want their
collector pieces restored and preserved. At this
moment, most areas in the United States could
use more gunsmiths, and this demand will most
likely increase in the future. It is estimated there
will be a need for many more skilled gunsmiths
in the United States during this decade than are
currently available. Anyone with the knowledge
of firearms (including their repair and restora-
tion) cannot help but fare well.
Besides needing a thorough knowledge of fire-
arms, their operating characteristics, and how to
repair them, the modern gunsmith is faced with
numerous rules and regulations that he or she
must abide by. Learning all of these laws may be
difficult at first, but eventually they will become
second nature.

This lesson covers the basic laws governing fire-
arms at the present time. However, these laws
are modified frequently. When you receive your
Federal Firearms License (FFL), you will also
receive a booklet titled Your Guide to Federal
Firearms Regulation (ATF Publication 5300.4),
shown in Figure 1, and another book titled
Federal Firearms Licensee Quick Reference and
Best Practices Guide (ATF Publication 5300.15),
published by the Bureau of Alcohol, Tobacco,
and Firearms (ATF). If for some reason these
books do not arrive with your FFL, request
copies immediately. Read the first 11 pages
of the ATF Publication 5300.15. Look at the
sample Acquisition & Disposition Record on
pages 13 and 14 and briefly look at the sample
forms on page 15 of the regulation book. Read
the questions and answers in ATF Publication
5300.4, which are written in plain English. Take
a look at the regulations referred to in the an-
swers for the sections concerning “Licensing,”
“Form 4473,” “Records Required,” ”Conduct
of Business,” “Manufacturers,” “Gunsmiths”
and “Brady Law.” Don’t worry about memo-
rizing any of the answers or the regulations
cited. Concentrate on understanding the con-
cepts involved and how these requirements tie
into the purpose of keeping firearms away from
prohibited people. Before you obtain your FFL,
an ATF Industry Operations Investigator will
review these regulations with you and answer
any questions you have. Then, keep both books
handy at all times to review in case certain ques-
tions arise. If you are in doubt about a rule or
regulation and you do not find the answer in
one of these books, or aren’t sure you understand
the answer you found, call your nearest ATF of-
fice for assistance. In most cases, they will be
able to give you a ruling on the spot.


Figure 1: Obtain, read, study and keep a copy handy of
the latest edition* of the Federal Firearms Regulations
Reference Guide.
*The 2014 edition is the current copy available at the
time of printing.

Key Principles of Federal Law Applicable to
Firearms Transactions
• A “prohibited person” can never legally

possess a firearm.

• A person who is buying and selling fire-
arms with the intent of making a profit is
“engaging in business” and must obtain a
Federal Firearms License.

• In a sale between two licensees, the seller
is required to verify the license status of
the buyer.

• The Firearms Transaction Record and
InstaCheck (NICS) were designed to
prevent prohibited people from acquiring
firearms from licensees.

• In any sale from a licensee to a non-
licensee, a Firearms Transaction Record
must be completed and an InstaCheck
must be conducted.

• Under federal law, a sale between two
non-licensees does not have to go
through a licensee. However, take note of
the following:

• The buyer and seller must be resi-
dents of the same state.

• The buyer cannot be a prohibited

• A licensee can “acquire” firearms
anywhere. He can only “dispose” of
firearms at his licensed premises or
at a “gun show” in his home state.

National Firearms Act weapons, such as
machine guns, are the only firearms that are
registered under federal law.
• All transactions in NFA weapons must

be approved by ATF before they can take

• A “making tax” and “transfer tax” are
imposed on NFA transactions involving

• Licensees who wish to manufacture,
import, or deal in NFA weapons must
pay an occupational tax to do so, in
addition to their license fee.

• Payment of the tax exempts them
from the “making tax” if they are

• A sale or “transfer” between two NFA
licensees is exempt from the “transfer tax.”


What is a “Prohibited Person”
A prohibited person is an individual who may
be characterized by any of the following:
• Has been convicted in any court of a

crime punishable by imprisonment for a
term exceeding one year.

• Is a fugitive from justice.

• Is an unlawful user of or addicted to any
controlled substance This includes medi-
cal and recreational marijuana even if legal
in your state. If it is prohibited Federally,
it makes you a prohibited person.

• Has been adjudicated as a mental defec-
tive or has been committed to a mental

• Is an alien illegally or unlawfully in the
United States or an alien admitted to the
United States under a nonimmigrant visa.

• Has been discharged from the Armed
Forces under dishonorable conditions.

• Having been a citizen of the United
States, has re nounced his or her citizen-
ship. There are specific requirements to
renounce your citizenship.

• Is subject to a court order that restrains
the person from harassing, stalking, or
threatening an intimate partner or child
of such intimate partner

• Has been convicted of a misdemeanor
crime of do mestic violence or where the
underlying charge was one of domestic

• Cannot lawfully receive, possess, ship, or
transport a firearm.

• A person who is under indictment or
information for a crime punishable by
imprisonment for a term exceeding one
year; such person may continue to law-
fully possess firearms obtained prior to
the indictment or information.


Your Federal
Firearms License
Anyone who engages in a business engraving,
customizing, refinishing or repairing firearms
must obtain an FFL. You will also need a license
if you personally manufacture firearms, buy guns
or ammunition for resale to others at wholesale
or retail prices; reload ammunition for others; or
take possession of someone else’s firearms, for
even simple maintenance as part of a business
[27 CFR 478.11; 27 CFR 478.41].

To qualify for an FFL, shown in Figure 2, you

• must be 21 years of age or over;

• must not be prohibited from shipping,
transporting, receiving or possessing fire-
arms or ammunition;

• must not have willfully failed to disclose
any material information, or made any
false statement, as to any material fact
in connection with an application for an
FFL; and

• must have premises from which you con-
duct your business, or from which you in-
tend to conduct a dealer’s business within
a reasonable period of time.

You must also certify all of the following:
1. The business to be conducted is not

prohibited by state or local law at that

2. Within 30 days of the approval of the
application, the business will comply
with applicable state and local law

3. The business will not be conducted until
the requirements of state and local law
have been met.

4. You have sent a copy of the application to
the chief law enforcement officer where
the premises is located notifying that of-
ficer that you have applied for a license.

5. Secure gun storage or safety devices
will be available at any place where fire-
arms are sold to non-licensees [27 CFR

An FFL entitles you to buy and sell, at whole-
sale or retail, firearms and ammunition to resi-
dents of your state. You may also, depending on
state laws, sell to residents of other states that
share a common border [18 USC 933(b)3; 27
CFR 478.41(b); 27 CFR 478.96].

Figure 2: Sample of FFL you will receive if you qualify.


You may operate out of your home, a garage,
an outbuilding, or a regular place of business,
but you must be open to the public during the
hours you specify on your application [27 CFR
Some local zoning laws may prohibit you from
operating any business out of your home, or
may prohibit the manufacture or storage of am-
munition. So be sure you look into your local
requirements for a business license to operate
from your home before applying for an FFL [18
USC 923(d)(1)].
When you specify “open to the public” on your
application, you need only open your doors for
the time specified. If you are a gunsmith only,
you can also open “by appointment only,” pro-
vided you set core hours when you will usually
be available for ATF inspection. Many part-
time gunsmiths have a regular job working for
another firm. Therefore, they prefer to open
their own business a couple hours each day, for
example, from 6 p.m. to 8 p.m. weekdays, and
from 9 a.m. to noon weekends. This is perfectly
legal, as long as those are the hours listed on
your application. You only need to be open to
the public you intend to serve, presumably gun
owners requiring repairs [18 USC 923(d)(1);
ATF Ruling 73-13].
If you are a dealer and a gunsmith, an FFL also
entitles you to do gun repairs on the same prem-
ises, providing this phase of your business is also
open to the public during the hours listed for
non-repair services. The cost for an FFL en-
titling you to buy, sell, and repair guns is $90
every three years after the $200 fee for the first
three years [18 USC 921(a)(11)(B) 27 CFR
478.42; 27 CFR 478.47(b)].
To apply for your FFL, call 202-648-6420 to
request an application package from the ATF
Distribution Center. You may also contact your
local ATF Industry Operations Office. To find
your local ATF Office, check your local telephone
directory or go to the ATF website,
Click on “Contact ATF” and then on “Contact
by State” to find all ATF offices in your state.

Request an Application package to obtain a
Federal Firearms License. You will then receive
an application and instructions for filling it out.
At this point, you should seriously consider
speaking with an attorney, preferably one inti-
mately aware of federal firearms laws, regarding
forming some form of business entity to protect
you in case you are sued. Furthermore, if you
elect to form some form of business entity, you
will apply in the name of the business entity, not
your own name.
In approximately two months, after attending
the initial interview with your local Industry
Operations Inspector, you will receive your FFL
if you qualify. It should be displayed promi-
nently in your place of business. Do not sign
your license. Have a few dozen copies made at
your local office supply store or library [27 CFR
When ordering firearms or ammunition for the
first time from a manufacturer or supplier, send
a copy of your license with an original signa-
ture with your order. When requesting catalogs
also send a copy of the license; most suppliers
require a copy of an FFL as proof that you are
entitled to trade discounts [27 CFR 478.94].
Your license is in effect until the expiration date
shown on the license. It covers operations only
at the location shown on the license, and under
certain restrictions, at gun shows and similar
activities. When it is time to renew your FFL,
the ATF will send a renewal application to you
about 60 days before the expiration date shown
on your license. If you do not receive your re-
newal application 45 days before the license
expiration date, and you want to stay in busi-
ness, immediately notify your local ATF of-
fice or the Federal Firearms Licensing Center.
You can contact the licensing center by phone
at (866)662-2750. See the ATF website (www. for the mailing address [27 CFR
478.49; 27 CFR 478.45].
To renew your FFL, complete and send the
application, with the fee attached, to the Post
Office Box listed on the renewal application


before the license expiration date. Filing your
renewal application on time gives you the right
to continue operations until the ATF acts on
the application, no matter how long it takes. If
necessary, you can obtain a “Letter of Authority”
from the ATF documenting your timely renew-
al and right to operate for your suppliers. (27
CFR 478.45)

NFA firearms can be purchased and owned by
individuals, business entities, or trusts. Over
the past few years the gun trust has become the
most widely used entity for purchasing NFA
firearms because of flexibility that comes with
a gun trust. A gun trust is a form of trust that
has been written to address the unique aspects
of purchase, use, transfer, and devise of firearms.
Not all trusts are gun trusts and many so-called
gun trusts advise people to do things that are in

violation of the law. It is important that unless
you are a lawyer, you not provide legal advice or
help people create a gun trust. In many states, it
is a violation of the law for a non-lawyer to fill
out a trust form for another individual. You can
download a brochure with more details about
gun trusts at

Gunsmiths and dealers must maintain a sepa-
rate permanent record of all firearms acquired
and disposed of. This includes firearms received
in pawn, curios and relics, and firearms received
for repair [27 CFR 478.125].
Firearms must be logged in when received
and logged out as they are disposed of, using a
Firearms Acquisition and Disposition Record (A
& D Record) like the one shown in Figure 3
[27 CFR 478.125(e)].

Figure 3: Sample entries for Acquisition and Disposition Book for Federal Firearms licensee Brian Smith for Brian’s
Sport Shop. It is important to keep accurate records.


You will have to prepare Form 4473, the
Firearms Transaction Record, covering the trans-
fer of each firearm to a non-licensed person.
Read this form carefully; it is the most impor-
tant form or record you will keep. These forms
must be kept alphabetically by name of pur-
chaser, chronologically by date of disposition,
or numerically by transaction serial number.
Form 4473, Part I, shown in Figure 3 is used
for over-the-counter sales. Form 4473, Part II, is
used for non-over-the-counter sales. Form 4473
Part II can only be used if the transaction is ex-
empt from the requirement for an InstaCheck.
No licensee should use Form 4473 Part II until
he completely understands the requirements
of 27 CFR 478.124(f ) and 27 CFR 478.96(b)
[27 CFR 478.102; 27 CFR 478.124; 27 CFR
Form 4473 does not have to be prepared to cov-
er the return of a repaired firearm to the same
person who gave it to you for repair. However,
to qualify for this exemption, the person you’re
returning the firearm to must be the exact same
person who brought it in, not a friend or relative
acting on his or her behalf [27 CFR 478.124(a)].
You must also keep a record of all armor-pierc-
ing ammunition received and disposed of (see
27 CFR 478.11 for the definition of Armor-
Piercing Ammunition). Records of the sale of
armor-piercing ammunition to law enforcement
or government agencies must be kept for two

years. Other records must be kept for 20 years.
The information should be kept in a bound
book with the information listed as shown in
Figure 4. Be sure that all of the information is
filled out on the form. Ammunition and fire-
arms record books are available from a num-
ber of sources, including Brownells [27 CFR
478.125]. To keep a computerized record of this
type of information, you need to request a vari-
ance [27 CFR § 478.125(h) i].

Licensees may freely buy and sell firearms and
ammunition among themselves. They do not
have to prepare Form 4473 on transfers to other
licensees; however, these transactions must be
recorded in a bound record book. The licens-
ee receiving the firearms or ammunition must
furnish a signed copy of his or her license to
the licensee selling, or otherwise disposing of,
any firearm prior to making the transaction.
Licensees may also ship interstate to other li-
censees [27 CFR 478.94].
Dealers may take orders for firearms and am-
munition at any location, but the orders must
be filled only at your licensed premises or a gun
show in the licensee’s home state. This includes
sales or dispositions to other licensees [27 CFR
478.41; 27 CFR 478.50; 27 CFR 478.100].

Figure 4: Ammunition disposition record should contain the above information.


Before delivering any firearm or armor-pierc-
ing ammunition, identify the buyer by name,
date of birth, residence address and a photo-
graph. This information must be verified from
a Government-issued Identification Document
[27 CFR 478.11; 27 CFR 478.124(c); 27 CFR
Under federal law, the minimum age for pur-
chasers of firearms and ammunition may be ei-
ther 18 or 21 years, depending on the item be-
ing purchased. You may not sell a handgun or
handgun ammunition to persons under 21 years
of age. You may not sell shotguns or rifles, or
shotgun and rifle ammunition, to persons under
18 years of age. You may sell ammunition that is
interchangeable between rifles and handguns to
a purchaser who is at least 18 years of age, if you
are satisfied that he or she will use the ammuni-
tion in a rifle [27 CFR 478.99(b)].
If you sell or deliver a handgun to a non-licensed
person, that person must be a resident of the
state in which your licensed premises is located.
If you sell or deliver a rifle or shotgun to a non-
licensed person, that person must be a resident
of the state in which your business is located.
In some cases, you may sell rifles and shotguns,
but not handguns, to a resident of another state.
This latter condition is valid only if the buyer’s
state allows an out-of-state purchase and if the
licensee’s state allows a sale to an out-of-state
resident [27 CFR 478.96(c)].
In addition to these requirements, you may not
lawfully sell or dispose of any firearm or ammu-
nition to prohibited people, such as convicted
felons. In addition, a licensee may not make a
sale or disposition of a firearm to anyone if the
sale or disposition would violate any state or lo-
cal law [27 CFR 478.99(b)]. Remember that in
most states no background check is required to
sell ammunition, but you cannot sell ammuni-
tion to someone you know or should know is a
prohibited person.

If firearms are lost or stolen, you should im-
mediately contact your local law enforcement
authorities and report the theft or loss to ATF
within 48 hours after the theft or loss is dis-
covered. Licensees must report thefts or losses
by telephoning 1-888-930-9275 (nationwide
toll free number) and by preparing ATF Form
3310.11, Federal Firearms Licensee Theft/Loss
Report [27 CFR 478.39a].
NOTE: If you deliver more than one handgun
to the same individual non-licensee within five
consecutive business days, this must be reported
to the ATF on Form 3310.4. The original copy of
this form must be mailed to the ATF’s National
Tracing Center (244 Needy Road Martinsburg,
West Virginia 25405) at the end of the business
day on which the sale occurs. A second copy
is sent to the Chief Law Enforcement Officer
where the sale took place. A third copy is retained
by the licensee [27 CFR 478.126a].
NOTE: If you hold a firearm in for repair for
more than 30 days, you must now complete
a 4473 when the firearm it returned to the
Licensed collectors may buy or acquire firearms
classified as curios and relics from any source.
If they have firearms in their collection they no
longer want, these firearms may be disposed of
to another licensee anywhere, or to non-licensed
residents in the collector’s home state, just as a
non-licensee can. A licensed collector maintains
a modified version of the A & D record main-
tained by licensed dealers. A licensed collector
does not prepare Forms 4473. A licensed col-
lector is not conducting a business. A person
conducting the business of buying and selling
curios and relics should be licensed as a dealer
[27 CFR 478.11; 27 CFR 478.41(d); 27 CFR
478.93; 27 CFR.125(f ).
If a licensee moves his or her business location,
the Chief of the Federal Firearms Licensing
Center must be notified at least 10 days before
moving the firearms and ammunition to a new
address [27 CFR 478.52].


Figure 5: Be sure to understand the laws regarding selling
and working with law enforcement off icers’ f irearms.

If you go out of business, the following rules
must be observed:
• Within 30 days after the licensee sells or

otherwise discontinues the firearms or am-
munition business, written notice must be
given of this change in status to the Chief
of the Firearms Licensing Center.

• If a licensee goes completely out of busi-
ness, the records and forms required to be
kept by the regulations must be delivered to
the ATF Out of Business Records Center
within 30 days.

• If the business is sold to a new owner, these
records and forms can either be trans-
ferred to the new owner, sent to the Out
of Business Records Center or to any ATF
Office in the Field Division in which the
business is located. (Some licensees do not
want to assume responsibility for their pre-
decessor’s records) [27 CFR 478.57; 27
CFR 478.127].

A straw purchase for firearms or ammo occurs
when someone purchases a firearm or ammo for
someone else whether they are a prohibited per-
son or not. While it is ok to purchase a firearm as
a gift, it is not permitted to allow someone else
to purchase a firearm when the intended owner
will be someone else. ATF has been aggressively
pursuing straw purchases and bringing charges
against individuals and dealers who partici-
pate in this illegal activity. The most common
charge is for making a false statement on the
4473 where you must certify that the firearm is
for your own use. While a background check is
not required in most states with the purchase
of ammo, sale of ammo to someone you know
or should have reason to know is a prohibited
person is also a straw purchase.

Section 925(a)(1) of the Gun Control Act of
1968 (GCA) exempts law enforcement agen-
cies from the transportation, shipment, receipt,
possession or importation controls of the act
when firearms are to be used for the official
business of the agency.
If a law enforcement officer is issued a certifica-
tion letter on the agency’s letterhead, signed by
a person in authority within the agency (other
than the officer purchasing the firearm), stating
that the officer will use the firearms in perfor-
mance of official duties, and that a records check
reveals that the purchasing officer has no con-
victions for misdemeanor crimes of domestic


violence, then the officer specified in the certifi-
cation may purchase a firearm from you, regard-
less of the state in which he or she resides, or
in which the agency is located. The seller is not
required to prepare a Form 4473 covering such
a sale; however, the transaction must be entered
in the permanent record. The certification letter
from the officer must be kept in your files.
The ATF considers the following as persons
having the authority to make certifications that
the law enforcement officer purchasing the fire-
arms will use the firearms in the performance of
his or her official duties:
• In a city or county police department, the

director of public safety or the chief or
commissioner of police.

• In a sheriff ’s office, the sheriff.

• In a state police or highway patrol
department, the superintendent of the
supervisor in charge of the office.

• In federal law enforcement offices, the
supervisor in charge of the office to which
the federal officer or employee is assigned.

The ATF also recognizes the validity of some-
one signing on behalf of a person of authority,
provided there is a proper delegation of author-
ity and overall responsibility has not changed in
any way.
Before making a sale to a law enforcement of-
ficer, check with the appropriate officials in your
home state and the purchasing officer’s home
state to make sure the sale is legal under state
law. The most important thing to remember is
that this exemption only applies to duty weap-
ons. A law enforcement officer purchasing a
firearm for personal use is considered a private
citizen [27 CFR 478.134].

This is only a brief overview of the federal laws
covered in the ATF publication 5300.4, Your
Guide to Federal Firearms Regulations. Be sure
that you become familiar with this guide. It is
sent to all FFL holders. You should read and be-
come familiar with ATF Publication 5300.15,
Federal Firearms Licensee Quick Reference and Best
Practices Guide. You will also get periodic news-
letters from ATF, roughly once every six months
which are written in plain English. You should
read them and, if there’s anything you have a
problem understanding, you should contact your
local ATF office. Updated issues of these publi-
cations are sent to all dealers when available.
You must follow all state, city, and local laws as
well. Some state and local laws and regulations
are covered in ATF publication 5300.5, State
Laws and Published Ordinances, shown in Figure
6. This publication is also sent to all FFL hold-
ers. However, complying with state and local
laws goes beyond the state laws listed in ATF
Publication 5300.5. The ATF prepared that
publication by contacting state authorities and
asking them what they wanted to include in the
book. What the states provided was not necessar-
ily complete. In addition, major changes to state
and local laws sometimes come in between edi-
tions of the ATF publication which might not be
re-issued for a couple of years. You need to con-
tact state and local authorities and get informa-
tion concerning their requirements from those
authorities, not just from the ATF publication.
In case there is a conflict between the federal
and state regulations, federal law does not su-
persede state law and state law does not super-
sede federal law. Where they do not agree, you
must comply with whichever is stricter. You will
then be in compliance with both.


Figure 6: ATF Form 4473 is needed for transfer of f irearms by a licensee.


As mentioned previously, NFA firearms, such
as machine guns, short barreled rifles, sawed-
off shotguns, destructive devices, and silencers
are the only firearms registered under federal
law. Normally, any time one of these firearms
changes hands, that is considered a transfer and
must be approved by ATF before the firearm
can change hands.
Manufacturers, importers, and dealers who
want to acquire and dispose of NFA weapons
must pay a special occupational tax (SOT), in
addition to their license fees, to do so. This SOT
payment also exempts them from the making
tax (Manufacturer) or from the transfer tax
(Importers or Dealers) [27 CFR 479.31; 27
CFR 479.68; 27 CFR 479.88)].
Licensed gunsmiths can accept NFA weapons
for repair and modification without paying oc-
cupational tax or transfer tax. This interpreta-
tion is documented in an ATF open letter on
“Repair of NFA Firearms,” dated February 18,
2000, and available on the ATF website.
However, there are several things you must keep
in mind before doing so to avoid committing a
serious violation of the law:
• Only a licensed manufacturer, who has

paid the NFA Special Occupational Tax
as an NFA Manufacturer, can manu-
facture an NFA weapon without prior
approval by ATF and without paying the
$200 making tax [27 CFR 479.62].

• Since the machine gun ban of 1986,
no machine gun can be manufactured
except for sale to a government agency
or for export. Only machine guns manu-
factured and registered as transferrable
before 1986 can be owned by a private
citizen, business entity or a gun trust [18
USC 922(o)].

• There is sometimes a fine line be-
tween gunsmithing and manufacturing.
Generally speaking, if you are re pairing

or modifying a customer’s gun, for his
or her personal use you are gunsmith-
ing (see remarks below on converting a
customer’s firearm to an NFA weapon).
You can do that with a dealer’s license
without paying the Special Occupational
Tax. If you are modifying a firearm to
prepare it for sale, generally speaking, you
may be manufacturing and could need
a manufacturer’s license and to pay the
Special Occupational Tax [ATF’s NFA
Handbook Sections 7.2.2 & 7.2.3].

If you have a Special Occupational Tax to man-
ufacture NFA firearms you must now comply
with ITAR. ITAR primarily deals with the im-
port and export of firearms. Even if you never
import or export any firearms, you must apply
and pay the $500 yearly fee for ITAR.
Fortunately, it is fairly easy to protect yourself
from inadvertently incurring SOT liability or
breaking the law. If you are working on a cus-
tomer’s NFA firearm which will be used for his
personal use, you are gunsmithing. However, see
remarks below on converting a customer’s fire-
arm to an NFA weapon [ATF’s NFA Handbook
Section 7.2.3].
If you are manufacturing an NFA firearm for
sale or as part of the manufacturing process for
a commercial customer, you are almost certainly
manufacturing and need a manufacturer’s li-
cense and to pay SOT [ATF’s NFA Handbook
Section 7.2.3].

Figure 7: There are specif ic laws that apply to machine
guns like the one shown above.


If you are on or close to the line between manu-
facturing and gunsmithing, such as modifying
an NFA weapon which your customer may
want to sell, contact your nearest ATF office,
tell them exactly what you are going to do, and
ask them if that is gunsmithing or manufactur-
ing. This communication should be in writing
so that you can get a written answer, hopefully
from the Firearms Technology Branch; you will
have the written response in your possession
should questions arise in the future.
If you are asked to convert a standard firearm
to an NFA weapon (not a machine gun) for a
customer who already owns the weapon, this
could only be done after a Form 1, prepared by
the owner, is approved by ATF and the making
tax paid. In order to do this without a manu-
facturer’s license and SOT payment, the firearm
must already belong to the customer and be in-
tended only for his or her personal use [ATF’s
NFA Handbook Sections 7.2.2 & 7.2.3].
NFA weapons are only within the law if they
are in the possession of the person they are reg-
istered to. The ATF allows a limited exception
for a weapon being temporarily transferred to
a gunsmith for repair and subsequent return to
its owner. However, to avoid possible misunder-
standings with the ATF or local law enforce-
ment, it is important that you document your
legal right to possess the NFA weapon you are
working on [ATF Open Letter 2/18/00 on
Repair of NFA Firearms].
This can be done in a couple of different ways.
The ATF “suggests” the owner obtain permis-
sion from the ATF for the transfer by com-
pleting and mailing ATF Form 5 (5320.5) to
the NFA branch and receive approval prior to
the delivery. The gunsmith should do the same
prior to returning the firearm. The ATF “sug-
gests” this because it is not required. The ad-
vantage is that this absolutely establishes your

right to possess the weapon. The disadvantage
is that getting Form 5 approved takes time. It
will probably take at least a month to get each
Form 5 approved.
Another way is by having the customer send you
a letter stating that he is the registered owner of
the NFA weapon, giving you the manufacturer
model and serial number, enclosing a copy of
the ATF Form registering the firearm to him
and stating exactly what he wants you to do be-
fore returning the firearm to him. When you
return the firearm, you would send him a let-
ter, along with the copy of his registration form,
telling him exactly what you’ve done. This way
has the advantage of not having to wait for ATF
to approve a Form 5. Another advantage is that
it reduces the possibility of a misunderstand-
ing between you and your customer by him,
or her, stating exactly what he wants done and
you stating exactly what was done. If you feel
that what he wants would get you into that gray
area between manufacturing and gunsmithing,
you could use the information from his letter as
the basis of your communication with the ATF
to make sure you could do that work without a
manufacturer’s license or SOT payment.
If you are converting an NFA weapon to an
unserviceable NFA weapon, it is recommend-
ed using the Form 5 method so that the ATF
would then have the firearm registered as an un-
serviceable weapon, a weapon that cannot fire
a shot or be readily restored to a firing condi-
tion. Unserviceable weapons are still subject to
the requirements of the NFA, but can be trans-
ferred, as a curio or ornament, without paying
the transfer tax by using a Form 5. An accept-
able method of rendering most firearms unser-
viceable is to fusion weld the chamber closed
and fusion weld the barrel solidly to the frame.
Certain unusual firearms require other methods
to render the firearms unserviceable [27 CFR
479.11and 479.91].


Questions and
The following questions and answers are in-
tended to help you better understand federal
laws and regulations that pertain to firearms
and ammunition. Although this listing is by no
means all-inclusive, it contains a selection of
those questions that the ATF receives frequently.
These questions and answers relate only to
federal laws and regulations. Numerous states,
counties, and municipalities have enacted their
own requirements concerning firearms and am-
munition. State laws and local ordinances that
are relevant to the enforcement of the Gun
Control Act are contained in ATF Publication
5300.5 or later editions.

Q: Who can get a license?

• ATF will approve the application if the
applicant is 21 years of age or older;

• is not prohibited from shipping, trans-
porting, receiving or possessing firearms
or ammunition;

• has not willfully violated the Gun
Control Act (GCA) or its regulations;

• has not willfully failed to disclose mate-
rial information or willfully made false
statements concerning material facts in
connection with his application;

• has premises for conducting business or
collecting; and

• the applicant certifies that
• the business to be conducted under

the license is not prohibited by state
or local law in the place where the
licensed premises is located;

• within 30 days after the application
is approved the business will comply
with the requirements of state and
local law applicable to the conduct of
the business;

• the business will not be conducted
under the license until the require-
ments of state and local law appli-
cable to the business have been met;

• the applicant has sent or delivered a
form to the chief law enforcement
officer where the premises is located
notifying the officer that the appli-
cant intends to apply for a license;

• secure gun storage or safety devices
will be available at any place in
which firearms are sold under the
license to persons who are not
licensees (“secure gun storage or
safety device” is defined in 18 U.S.C.
921(a)(34)). [18 U.S.C. 923(d)(1), ,
27 CFR 478.47(b)]

Q: Does the Federal Government issue a
license or permit to carry a concealed
No. Neither the ATF nor any other fed-
eral agency issues such a permit or license.
Carrying permits may be issued by a state
or local government.


Q: Do antique firearms fall under the purview
of the GCA?
No. However, state and local laws may
include antique firearms. Always check
relevant state or local laws along with
federal laws.
[18 U.S.C. 921(a)(3) and (16), 27 CFR
478.11 and 478.141(d)]

Q: What kinds of ammunition are covered by
the GCA?
Ammunition includes cartridge cases,
primers, bullets or propellant powder de-
signed for use in any firearm other than an
antique firearm.
Items NOT covered include blank am-
munition, tear gas ammunition, pellets and
nonmetallic shotgun hulls without primers.
Generally, no records are required for am-
munition transactions. However, informa-
tion about the disposition of armor-pierc-
ing ammunition is required to be entered
into a record by importers, manufacturers,
and collectors.
A license is not required for dealers in am-
munition only.
[18 U.S.C. 921(a)(17) and 922(b)(5), 27
CFR 478.11 and 478.125]

Q: Does the GCA control the sale of firearms
No, except that frames or receivers of
firearms are “firearms” as defined in the
law and subject to the same controls as
complete firearms. Silencer parts are also
firearms under the GCA, as well as under
the National Firearms Act (NFA). Certain
machine gun parts, such as conversion
parts or kits, are also subject to the NFA.

[18 U.S.C. 921(a)(3) and (24), 26 U.S.C.
5845, 27 CFR 478.11 and 479.11]

Q: Are black powder dealers required to be
licensed as ammunition dealers under the
No. However, black powder dealers are
subject to the provisions of 27 CFR Part
555, Commerce in Explosives, which re-
quires that a dealer in any quantity of black
powder must have a license as a dealer.
[18 U.S.C. 842]

Q: Does the GCA prohibit anyone from
making a handgun, shotgun or rifle?
With certain exceptions a firearm may
be made by a non-licensee provided it is
not for sale and the maker is not prohib-
ited from possessing firearms. However,
a person is prohibited from assembling a
non-sporting semi-automatic rifle or non-
sporting shotgun from imported parts. In
addition, the making of an NFA firearm
requires a tax payment and approval by the
ATF. An application to make a machine
gun will not be approved unless docu-
mentation is submitted showing that the


firearm is being made for a federal or state
[18 U.S.C. 922(o) and (r), 26 U.S.C. 5822,
27 CFR 478.39, 479.62 and 479.105]

Q: To whom may an unlicensed person

transfer firearms under the GCA?
A person may sell a firearm to an unli-
censed resident of his state, if he does not
know or have reasonable cause to believe
the person is prohibited from receiving or
possessing firearms under federal law. A
person may loan or rent a firearm to a resi-
dent of any state for temporary use for law-
ful sporting purposes, if he does not know
or have reasonable cause to believe the per-
son is prohibited from receiving or possess-
ing firearms under federal law. A person
may sell or transfer a firearm to a licensee
in any state. However, a firearm other than
a curio or relic may not be transferred in-
terstate to a licensed collector.
[18 U.S.C. 922(a)(3) and (5), 922(d), 27
CFR 478.29 and 478.30]

Q: From whom may an unlicensed person
acquire a firearm under the GCA?
A person may only acquire a firearm within
the person’s own state, except that he or she
may purchase or otherwise acquire a rifle
or shotgun, in person, at a licensee’s prem-
ises in any state, provided the sale complies
with state laws applicable in the state of
sale and the state where the purchaser
resides. A person may borrow or rent a

firearm in any state for temporary use for
lawful sporting purposes.
[18 U.S.C. 922(a)(3) and (5), 922(b)(3), 27
CFR 478.29 and 478.30]

Q: May an unlicensed person obtain a firearm
from an out-of-state source if the person
arranges to obtain the firearm through
a licensed dealer in the purchaser’s own
A person not licensed under the GCA and
not prohibited from acquiring firearms
may purchase a firearm from an out-of-
state source and obtain the firearm if an
arrangement is made with a licensed dealer
in the purchaser’s state of residence for the
purchaser to obtain the firearm from the
dealer. The out-of-state dealer will ship
the firearm to the dealer in the purchaser’s
home state and the purchaser will pick up
the firearm from that dealer.
[18 U.S.C. 922(a)(3) and 922(b)(3)]

Q: May an unlicensed person obtain
ammunition from an out-of-state source?
Yes, provided he or she is not a person
prohibited from possessing or receiving
[18 U.S.C. 922(g) and (n)]

Q: Are there certain persons who cannot
legally receive or possess firearms and/or
Yes, a person cannot lawfully receive, pos-
sess, ship, or transport a firearm who


• has been convicted in any court of a
crime punishable by imprisonment for a
term exceeding 1 year;

• is a fugitive from justice;
• is an unlawful user of or addicted to any

controlled substance; including drugs
that may be legal at a state level but
still prohibited at the federal level, i.e.,

• has been adjudicated as a mental defec-
tive or has been committed to a mental

• is an alien illegally or unlawfully in the
United States or an alien admitted to
the United States under a nonimmi-
grant visa;

• has been discharged from the Armed
Forces under dishonorable conditions;

• having been a citizen of the United
States, has renounced his or her

• is subject to a court order that restrains
the person from harassing, stalking, or
threatening an intimate partner or child
of such intimate partner; or

• has been convicted of a misdemeanor
crime of domestic violence or where the
underling offense was one of domestic

A person who is under indictment or
information for a crime punishable by
imprisonment for a term exceeding 1 year
cannot lawfully receive a firearm. Such
person may continue to lawfully possess
firearms obtained prior to the indictment
or information.
[18 U.S.C. 922(g) and (n), 27 CFR

Q: Is there anything a person can do who
cannot lawfully receive or possess guns?
The GCA provides the Attorney General
with the authority to grant relief from this
disability where the Attorney General de-
termines that the person is not likely to act
in a manner dangerous to the public safety
and granting relief would not be contrary to
the public interest. The Attorney General
delegated this authority to the ATF.
Since October 1992, however, the ATF’s
annual appropriation has prohibited the
expending of any funds to investigate or
act upon applications for relief from federal
firearms disabilities submitted by individu-
als. As long as this provision is included in
current ATF appropriations, the Bureau
cannot act upon applications for relief from
federal firearms disabilities submitted by
[18 U.S.C. 922(g), 922(n) and 925(c)]

Q: Are there any alternatives for relief from
firearms disabilities?
A person is not considered convicted for
Gun Control Act purposes if he has been
pardoned, had his civil rights restored, or
the conviction was expunged or set aside,
unless the pardon, expungement, or res-
toration expressly provides the person
may not ship, transport, possess, or receive
Persons convicted of a federal offense may
apply for a presidential pardon (28 CFR
1.1-1.10 specify the rules governing peti-
tions for obtaining presidential pardons).
You may contact the Pardon Attorney’s
Office at the U.S. Department of Justice,
500 First Street, N.W., Washington, DC
20530, to inquire about the procedures for
obtaining a presidential pardon.


Persons convicted of a state offense may
contact the State Attorney General’s Office
within the state in which they reside and
the state of their conviction for informa-
tion concerning any alternatives that may
be available, such as pardons and civil
rights restoration.
[18 U.S.C. 921(a)(20) and (a)(33)]

Q: May a person who is relocating out-of-
state move firearms with other household
Yes. A person who lawfully possesses a
firearm may transport or ship the firearm
interstate when changing his or her state
of residence. The person must notify the
mover that firearms are being transported.
He or she should also check state and local
laws where he or she is relocating to and
from to ensure that the movement of fire-
arms does not violate any state or local law.
NFA firearms must have prior approval
from the Bureau of Alcohol, Tobacco, and
Firearms before they may be moved inter-
state. The person must notify the mover

that firearms are being transported. He
or she should also check state and local
laws where relocating to in order to ensure
that movement of firearms into the new
state does not violate any state law or local
[18 U.S.C. 922(a)(4) and 922(e), 27 CFR
478.28 and 478.31]

Q: May a non-licensee transport firearms
interstate for sporting purposes?
Yes, provided the weapon is unloaded and
in a locked trunk or, in a vehicle lacking a
trunk, in a locked container other than the
glove compartment or console. The firearm
may be transported for any lawful pur-
pose from any place where the possessor
can possess and carry it to any other place
where he can possess or carry it.
[18 U.S.C. 926A]

Q: May a non-licensee ship a firearm through
the U.S. Postal Service?
A non-licensee may not transfer a firearm
to a non-licensed resident of another state.
A non-licensee may mail a shotgun or rifle
to a resident of his or her own state or to
a licensee in any state. The Postal Service
recommends that long guns be sent by
registered mail and that no marking of any
kind which would indicate the nature of
the contents be placed on the outside of any
parcel containing firearms. Handguns are
not mailable. A common or contract carrier
must be used to ship a handgun.
[18 U.S.C. 1715, 922(a)(3), 922(a)(5) and
922 (a)(2)(A)]


Figure 8: It is illegal to ship a handgun through the mail.
A contract carrier must be used to ship a handgun.

Q: May a non-licensee ship a firearm by
common or contract carrier?
A non-licensee may ship a firearm by a
common or contract carrier to a resident of
his or her own state or to a licensee in any
state. A common or contract carrier must
be used to ship a handgun. In addition,
federal law requires that the carrier be no-
tified that the shipment contains a firearm
and prohibits common or contract carriers
from requiring or causing any label to be
placed on any package indicating that it
contains a firearm.
[18 U.S.C. 922(a)(2)(A), 922(a) (3),
922(a)(5) and 922(e), 27 CFR 478.31 and

Q: May a non-licensee ship firearms
interstate for his or her use in hunting or
other lawful activity?
Yes. A person may ship a firearm to him-
self or herself in care of another person in
the state where he or she intends to hunt
or engage in any other lawful activity. The
package should be addressed to the owner.
Persons other than the owner should not
open the package and take possession of
the firearm.

Q: May aliens legally in the United States buy
An alien legally in the U.S. may acquire
firearms if he has a state of residence. An
alien has a state of residence only if he is
residing in that state with the intention
of making a home in that state. Due to a
recent change, the residency requirement
for aliens legally in the country is the same
as for U.S. citizens. However, someone
who has entered the country under a non-
immigrant visa cannot purchase or possess
a firearm unless he meets one of the fol-
lowing exemptions: (1) is in possession of

a hunting license or permit lawfully issued
by the federal government, a state or lo-
cal government, or an Indian tribe feder-
ally recognized by the Bureau of Indian
Affairs, which is valid and unexpired; (2)
was admitted to the United States for law-
ful hunting or sporting purposes; (3) has
received a waiver from the prohibition
from the Attorney General of the United
States; (4) is an official representative of
a foreign government who is accredited
to the United States Government or the
Government’s mission to an international
organization having its headquarters in
the United States; (5) is en route to or
from another country to which that alien
is accredited; (6) is an official of a foreign
government or a distinguished foreign
visitor who has been so designated by the
Department of State; or (7) is a foreign law
enforcement officer of a friendly foreign
government entering the United States on
official law enforcement business.
[18 U.S.C. 921, 922(b)(3), (d) and (g), 27
CFR 478.11 and 478.99(a)]


Q: May a parent or guardian purchase
firearms or ammunition as a gift for a
juvenile (less than 18 years of age)?
Yes. However, possession of handguns
by juveniles (less than 18 years of age) is
generally unlawful. Juveniles generally may
only receive and possess handguns with the
written permission of a parent or guard-
ian for limited purposes, e.g., employment,
ranching, farming, target practice, hunting
or a course of instruction in the safe and
lawful use of a handgun.
[18 U.S.C. 922(x)]

Q: Where can a dealer get ATF Form 4473?

They are available free of charge from the
ATF Distribution Center. Please order a
quantity of forms estimated for 6 months
use. They can be ordered online or by tele-
phone at 202-648-6420.

Q: Does an unlicensed person need an ATF
Form 4473 to transfer a firearm?
No. ATF Form 4473 is required only for
transfers by a licensee.
[27 CFR 478.124]

Q: Does a dealer have to execute ATF Form
4473 to take a weapon out of the dealer’s
inventory for his or her own use?
No. However, the “bound book” must re-
flect the disposition of the firearm from
business inventory to personal use.
However, if the business is a corporation,
and the firearm is being transferred to a
corporate officer or director for other than
business purposes, then a Form 4473 must
be executed.
[27 CFR 478.124 and 478.125a]

Q: Who signs ATF Form 4473 for the seller?
ATF Form 4473 must be signed by the per-
son who verified the identity of the buyer.

Q: Is a Social Security card a proper means
of identification for purchasing a firearm
from an FFL?
No. A Social Security card, alien registra-
tion card, or military identification alone
does not contain sufficient information to
identify a firearms purchaser. However, a
purchaser may be identified by any com-
bination of government-issued documents
which together establish all of the required
information: name, residence address, date
of birth, and photograph of the holder.
[27 CFR 478.11 and 478.124(c)]

Q: When must the ATF Form 4473 be
Part I used for over-the-counter sales must
be completed, signed and dated by the
buyer prior to delivery of the firearm.
Part II (green form) used for intra-state
non-over-the-counter sales must be com-
pleted, signed and dated in duplicate by
the buyer before it is sent to the purchaser’s
Chief Law Enforcement Officer.
[27 CFR 478.124(c) and 478.124(f )]

Q: What is a “bound book?”

A “bound book” is a permanently bound
book or an orderly arrangement of loose-
leaf pages which must be maintained on
the business premises. The format must
follow that prescribed in the regula-
tions, and the pages must be numbered
[27 CFR 478.121 and 478.125]


Q: May a dealer keep more than one bound
book at the same time?
Yes. A dealer in firearms is not limited to
using only one bound book. It may be con-
venient for a dealer to account for differ-
ent brands or types of firearms in separate
bound books.

Q: Does the Government sell a record book
for licensees to use in recording their
receipts and dispositions of firearms?
No. Certain trade associations have them
available at nominal cost. Your sup-
plier should be able to tell you about this.
Brownells, Inc. is one supplier who fur-
nishes such recordkeeping books.

Q: What is the dealer’s responsibility where a
variance from normal regulatory practice
has been authorized?
The ATF letter authorizing the variance
must be kept at the licensed premises and
available for inspection. For businesses with
more than a single licensed outlet, each
outlet covered by the variance must have a
copy of the letter authorizing the change.
[27 CFR 478.22 and 478.125(h)]

Q: How much time does a dealer have to
record acquisitions and dispositions of
firearms in his or her bound book?
Generally, licensees have to enter the ac-
quisition or purchase of a firearm by the
close of the next business day after the ac-
quisition or purchase and shall record sales
or other dispositions within 7 days.
However, if commercial records contain-
ing the required information are available
for inspection and are separate from other

commercial documents, dealers have 7 days
from the time of receipt to record the re-
ceipt in the bound book.
If a disposition is made before the acquisi-
tion has been entered in the bound book,
the acquisition entry must be made at the
same time as the disposition entry.
[27 CFR 478.125]

Q: Are the ammunition record-keeping
requirements the same as for firearms?
No. No records are required for ammuni-
tion other than armor-piercing ammuni-
tion. Disposition records must be kept by
licensed manufacturers, importers, and col-
lectors for transactions in armor piercing
[27 CFR 178.125]

Q: Are rental firearms subject to
recordkeeping control?
Yes, if the firearms are taken off the prem-
ises of the licensee. However, the record-
keeping is not imposed on the loan or
rental of firearms for use only on the prem-
ises of the licensee.
[27 CFR 478.97]


Q: May a licensee who has firearms in his
or her private collection sell any of these
firearms without making firearms record
A licensee may sell a firearm from his or
her personal collection, subject only to the
restrictions on firearm sales by unlicensed
persons, provided the firearm was entered
in the licensee’s bound book and then
transferred to the licensee’s private collec-
tion at least 1 year prior to the sale. When
the personal firearm is sold, the sale must
be recorded in a bound book for disposi-
tions of personal firearms, but no ATF
Form 4473 is required. This is another
place where a licensee must be very care-
ful that state and federal law agree. Also,
a licensee must be able to prove that the
firearm was in his personal collection for at
least one year before it was sold without a
Form 4473.
[27 CFR 478.125a]

Q: If a person timely files an application for

renewal of a license and the present license
expires prior to receipt of the new license,
may the person continue to conduct the
business covered by the expired license?
Yes. A person who timely files an applica-
tion for renewal of a license may continue
operations authorized by the expired li-
cense until the application is finally acted
upon. An application is timely filed when
it is received accurate and complete at the

P.O. Box listed on the application form
with the appropriate renewal fee.
If a person does not timely file a license
renewal application and the license ex-
pires, the person must file ATF Form 7
(5310.12), Application for License, or an
ATF Form 7CR (5310.16), Application
for License (Collector of Curios or Relics),
as required by 27 CFR 478.44, submit the
application fee applicable to a new busi-
ness, and obtain the required license before
continuing business activity.
[27 CFR 478.45]

Q: May a licensed gunsmith receive an NFA
firearm for purposes of repair?
Yes, for the sole purpose of repair and sub-
sequent return to its owner. It is suggested
that the owner obtain permission from the
ATF for the transfer by completing and
mailing ATF Form 5 (5320.5) to the NFA
branch and receiving approval prior to the
delivery. The gunsmith should do the same
prior to returning the firearm.
Only the face of the form needs to be com-
pleted in each instance. ATF Form 5 may
be obtained from the Bureau of Alcohol,
Tobacco, and Firearms, NFA Branch. ATF
Form 5 is also available on the internet at .


SDI is grateful to Firearms Industry Consulting Group for editing the gun law information provided in this section.

Firearms Industry Consulting Group (FICG), a division of Prince Law Off ices, P.C., is a f irearms
industry specif ic group of attorneys and consultants dedicated to the protection of the 2nd Amendment
of the U.S. Constitution in all aspects of f irearms law. Handling issues from incorporation, using
in-house generated f irearms industry specif ic documents to ensure the utmost protection of our clients,
to warning conferences, revocations and other issues with the Bureau of Alcohol, Tobacco, Firearms
and Explosives, FICG is proud to boast a national, and now even international, reputation in the
industry. In providing the best protection and advice for its clients, FICG also employs retired ATF
f irearms and explosives consultants, such as Howard Wolfe, for conducting mock compliance checks and
for consultation on other legal issues. The driving force behind FICG is Attorney Joshua Prince, who
has garnered a national reputation for protection of the 2nd Amendment and, within Pennsylvania,
Article 1, Section 21 of the PA Constitution.



The Importance of a Good Start 31
What Does And Does Not Work — Tips From People Who Know 32
Naming Your Business 32

Start-Up Costs 35
Operating Expenses 35
Setting Up A Business Bank Account 36
Financing Your Business 36
Anticipating And Avoiding Cash-Flow Problems 37

What Coverage Does Your Business Need? 39
What Coverage Does a Self-Employed Person Need? 40


Working With Zoning Restrictions 44
State And Federal Regulations 44

Sole Proprietorship 45
Partnership 45
Limited Liability Company (LLC) 46
Corporation 47
Company Documentation 49

Business License And Personal Property Taxes 50
Sales Taxes 50
Self-Employment Tax 50
Estimated Taxes 52
Affordable Care Act 52
Deductions 52
Regular Business Expenses 53
Keeping Records For Tax Purposes 54
How To Avoid An Audit 54


hapter 2 – Setting U

p a B



Setting Up Your
Own Business

To get your business started, you will need a
product or service to sell as well as market re-
search and financial planning. The primary
cause for most new business failure is poor
planning and insufficient research. This lesson
will give you the information you need to plan
your business properly so you can get off to a
strong start. To be successful in your new busi-
ness, you will need to carefully calculate how
to make the business not only survive but also


thrive. In addition to market research and finan-
cial planning, you will need a positive attitude,
confidence, and a strong belief in yourself and
your abilities. Think about it: What do success-
ful people have in common? They are moti-
vated, enthusiastic, and self-confident. If you do
not believe in your abilities, no one else will. If
you believe in your abilities, it will show, and you
will inspire confidence in others.

Since many businesses fail because of in-
adequate financing, the Small Business
Administration (SBA) advises you to start your
venture with enough capital to get you through
the first year. With luck, you will start earning
an income before then, but you will need cash
reserves. If you can afford to finance the busi-
ness yourself, you should.
You may want to set up your own business slow-
ly. If you start small, you will not take on the
financial burden that bogs down many small
businesses. Start with one or two clients while
you are still working full-time. Then when you
are ready to go full force, you will have a base
from which to start. This really works!
Another good way to get started is to use a
part-time job to provide supplemental income
to your new business. When your business in-
come equals the income from your part-time
job, it is time to quit the job. Temporary work
can also provide steady income while you are
getting started and put you in contact with po-
tential clients.

According to successful entrepreneurs, to be
successful in your business you should endeavor
to do the following:
1. Spend 6-10 months researching the

market and setting up the business.

2. Plan financial strategies and maintain
accurate records.

3. Market your business continually and

4. Create a niche in the market for your
service or product.

5. Always appear confident and competent.

6. Show your clients that you are serious
about your work and eager to please.

7. Be flexible, particularly during unexpected

8. Enjoy your new vocation so thoroughly
that it gets you through tough times.

Selecting a name for your business is a task you
should take seriously. Your business name will be
with you for years. Once you have built a reputa-
tion, it will be hard to change your name with-
out losing customers. Here are some guidelines
to consider when selecting a business name.
1. Your business name should describe your

service. The public should instantly know
what service you provide just by looking at
your name.


2. Names beginning with the first letters in
the alphabet have a distinct advantage over
others because they have prime positions
in directories and phone books.

3. Using your own name in the business may
harm your family if you are forced into

4. Your business name should be easy to
pronounce, easy to remember, and easy to
spell. If it is not, your word-of-mouth ad-
vertising will suffer.

With these guidelines in mind, make a list of
names that appeal to you. Ask your friends and
relatives to help you brainstorm. Once you have
a list, look in a dictionary or thesaurus to find
synonyms. Aim for combinations that are short
and snappy. Once you decide on a name, regis-
ter it with the county clerk’s office to find out if
anyone else is using it. If anyone is, you will have
to come up with another.


Expense Budget [Company Name] [Month and Year]
Personnel Budget Actual Difference ($) Difference (%)

Office $- 0.0%

Store – 0.0%

Salespeople – 0.0%

Others – 0.0%

Operating Budget Actual Difference ($) Difference (%)

Advertising $- 0.0%

Bad debts – 0.0%

Cash discounts – 0.0%

Delivery costs – 0.0%

Depreciation – 0.0%

Dues and subscriptions – 0.0%

Employee benefits – 0.0%

Insurance – 0.0%

Interest – 0.0%

Legal and auditing – 0.0%

Maintenance and repairs – 0.0%

Office supplies – 0.0%

Postage – 0.0%

Rent or mortgage – 0.0%

Sales expenses – 0.0%

Shipping and storage – 0.0%

Supplies – 0.0%

Taxes – 0.0%

Telephone – 0.0%

Utilities – 0.0%

Other – 0.0%

Total Expenses Budget Actual Difference ($) Difference (%)

$- $- $- 0.0%

Figure 1: Example of operating budget worksheet.


Setting Up an
Operating Budget
Starting any business costs money. If you do not
have enough money to pay your expenses and
your salary, your business will fail. One way to
avoid this problem is to prepare a first-year op-
erating budget. Figure 1 shows an example of a
simple operating budget worksheet you can find
online for free to create yourself.

Going into business for yourself means that you
will have certain start-up (one-time) costs that
you must plan for. To estimate these start-up
costs, list the items you will need to start your
business. Here are some suggestions:
• Computer & software
• Telephone answering system and/or cell

• Desk and chair
• Bookcase or shelving
• Filing cabinet
• Tools needed to run your business

Now, estimate the cost of each item on your
list. This step may require some research. For
instance, to estimate the cost of your office fur-
nishings, you might look in an office furniture
catalog. Enter your estimate for each item on a
first-year operating budget log.

In addition to start-up expenses, your first year’s
budget must include ongoing operating ex-
penses. Here are some items you may want to
• Advertising
• Your salary
• Insurance
• Utilities
• Rent
• Office supplies: paper clips, pens,

pencils, etc.
• Association dues
• Business cards
• File folders
• Printing and design costs for business

cards and office stationery
• Licenses and permits
• Backup fund (20 percent of total budget)

Enter your estimated operating expenses in the
budget, and calculate your total projected first-
year operating budget. Look at your total. Does
the amount surprise you?
Do you have that much money put away? Of
course, the cash you need does not have to come
from your own bank account — you can borrow
money. But the less you borrow, the more secure
your business venture will be.


Although a business account costs more than an
individual checking or savings account, it is a
good idea to separate your private and business
funds. One advantage of a separate business ac-
count is that you can use your statement and
checks to keep a record of expenses. Another
benefit is that the checks can be printed with
your business name and logo.
In order to open a commercial account, banks
require you to present various types of docu-
mentation specific to the type of business en-
tity you have chosen to form. Contact your local
county clerk’s office to find out how to obtain
the correct documentation for your business.

As stated earlier, if you can afford to finance
the business yourself, you should. Even if you
can only afford to finance half of it, you are still
ahead of the game. The most common ways to
finance a new business are by financing with
your own money, using credit cards, borrowing
from family and friends, and borrowing from a
Self-Financing. Self-financing means you save
the money and finance your business yourself.
Because saving all the money you need can take
a long time, it might be easier to begin part-
time. Then as your business grows, you can put
your profits back into the business and grow
slowly. The advantage of financing your own
business is that you are in total control and you
do not have to answer to anyone else.
Using Credit Cards. Some people use credit
cards to help finance their new businesses. If
you decide to try this, use your credit card exclu-
sively for business expenses. Never mix personal
and business expenses. Pay your credit card bal-
ance as soon as possible because interest rates

for credit cards are often high. If you establish
good credit on a credit card, it may help you
later if you want to apply to that same bank for
a loan to expand your business.
Borrowing From Family and Friends. If you
have a good track record, your friends and rela-
tives may be willing to invest in your business.
You can offer to pay them interest or a percent-
age of your profits until you have repaid the
loan. If you choose to use this method, make
sure you have a business plan to show your lend-
ers. Avoid letting them have a say in your busi-
ness decisions. Structure the deal just as if they
were bankers lending you money in exchange
for a good return on their investment. To as-
sure them that you will repay the loan, put the
terms in writing and include penalties. Family
and friends may be the perfect source for loan
money to start your business, but remember, if
your business fails, it could mean the end of your
Borrowing From a Bank. You can also finance
your business with a bank loan. Unfortunately,
it is often easier to get a loan to remodel your
house or to buy a new car than it is to get one
to start a business. Many banks do not want to
lend money to a new business because of the
historically high failure rate. Those that do of-
ten charge exceptionally high interest rates.
Although commercial lenders have been reluc-
tant to lend to small start-up businesses in the
past, this is changing. However, be prepared to
demonstrate your long-term business strategy
and your current financial status. You have a
better chance of getting a loan if you have al-
ready raised some of the money yourself. Many
lenders expect you to finance at least 50 percent
of your business.
If you decide to apply for a bank loan, you may
contact the Small Business Association (SBA)
for a list of banks in your area that participate
in small business loan programs. Other pub-
lic sources of funding partially sponsored by


the SBA include Small Business Investment
Companies (SBICB) and Minority Enterprise
Small Business Investment Companies
(MESBICs). More than 400 SBICs through-
out the country provide loans and management
assistance to fledgling businesses. If you live in
a rural area, the Farmers Home Administration,
part of the U.S. Department of Agriculture, loans
money through local banks. The Commerce
Department also offers loans through regional
Economic Development Administrations in
cities with high unemployment.
To help develop the information that a bank
or other sources of funding would be looking
for when considering your loan request, contact
your local Service Corps of Retired Executives

Cash flow is simply cash that comes in and cash
that goes out of a business. Cash-flow problems
arise when more cash goes out than comes in.
Often a business pays up front for its supplies
but waits weeks or months to be paid by its cli-
ents. This situation can lead to serious cash-flow
problems. To avoid this, establish billing and
payment policies that do not leave you short of
cash. One simple way to do this is to minimize
what others owe you.
Billing Policies. Under a standard billing policy,
customers must pay within 30 days of receipt to
avoid paying interest. This is called net 30 bill-
ing. To motivate your clients to pay sooner, offer
a discount for bills paid in less than 30 days. For
example, 5 percent 10 net 30 means the custom-
er gets a 5 percent discount if the invoice is paid
within 10 days, otherwise the balance is due in
30 days (Figure 2).
While it is not always feasible, try to get de-
posits, retainers, and partial payments from
your clients when you begin a project. If you
anticipate buying materials, you can request an

advance to pay for those expenses. This way, you
have at least part of the total fee for the project
and a hedge against the cash squeeze.
Payment Policies. Make the most of the cash
you have on hand by charging business expenses
and then paying the charge bills on time, but not
early. And, of course, deposit your earnings in an
interest-bearing checking account. In addition,
ask suppliers for interest-free credit. After you
have established a dependable credit history, they
may be willing to set up such an arrangement.
Another way to avoid cash-flow problems is to
keep a cash reserve. As you already know, it is
a good idea to have enough money saved in an
interest-bearing account to cover your business
costs for at least a year. It makes sense to es-
tablish some financial goals, such as how much
you hope to make in the first year. Setting a goal
helps you keep your budget strategy realistic and
on target.

Your company Name
[Your Company Slogan]

[Street Address]
[City, ST ZIP Code]
Phone [509.555.0190] Fax [509.555.0191]


INVOICE #[100]

[Company Name]
[Street Address]
[City, ST ZIP Code]

[Company Name]
[Street Address]
[City, ST ZIP Code]








Make all checks payable to [Your Company Name]
Terms: 10 NET 30

If you have any questions concerning this invoice, contact [Name, phone number, e-mail]

Thank you for your business!

Figure 2: By indicating your terms on your invoice
clearly, the customer knows when payment is expected
and can be motivated to pay early by offering a discount.


Accepting Credit And Debit Card Payments
While other card processors have walked away
from the firearms/shooting sports industry,
Payment Alliance International (PAI) has em-
braced it. Payment Alliance International can help
you get set up to accept convenient forms of pay-
ment, including Visa, MasterCard, and Discover,
all at wholesale rates. Their Shooting Sports
Payment Package, as negotiated by the NRA
and NSSF, ensures that new gun merchants not
only get the best rates but also the best terms,
including no monthly minimums, no early ter-
mination fees, and no to low startup fees.

Figure 3: Payment Alliance International can help your business accept credit card payments.

PAI was the first to create a complete Shooting
Sports Payments Package and will process cred-
it and debit cards in a storefront, wireless, or
ecommerce environment. They work with over
1,000 FFLs and industry professionals and of-
fer a wide variety of payment solutions to meet
your individual needs.
Under the Shooting Sports Payments Package,
Payment Alliance International offers the guar-
anteed lowest price point, and a portion of ev-
ery card transaction is donated to the National
Shooting Sports Foundation or the NRA (www.


Insuring Your
Because your business is a considerable invest-
ment of time and money, you should carry insur-
ance to protect yourself in case of fire, theft, or
lawsuit. Your insurance should give you enough
money to start over if you need to. Visit an insur-
ance agent and discuss your needs. It is a good
idea to visit more than one agent to compare the
coverage and the cost of various programs.

To find insurance that fits your needs, start by
identifying your business’s risks. Consider legal
issues, risk factors, and potential losses. It makes
sense to work with an insurance broker who
sells several different policies and has a broad
knowledge of the industry. But do not overlook
independent agents, because some insurance
companies will only sell policies through them.
To get the best price, you may want to take out
several policies from different insurance compa-
nies, although you may get a discount if you use
one company for all your insurance needs.
Before deciding on an insurance program, com-
pare prices and coverage. Many insurance com-
panies offer lower rates for preventive measures
such as burglary and smoke alarms. But these
preventions may cost more than you would save
with reduced premiums. The insurance market
is competitive, so shop around to get the most
appropriate and affordable policy. When you do
settle on a policy, be sure to describe precisely
and record all assets and their values.

For an additional cost, a replacement-value in-
surance policy pays for replacement of any dam-
aged or destroyed item, regardless of its age. A
regular policy only pays you the value of your
damaged possessions after depreciation. This
means that a 10-year-old desk you paid $500
for could be worth only $50 after depreciation.
Comprehensive Liability Coverage. Although
the cost of liability insurance has skyrocketed in
recent years, it may be worth getting. Liability
insurance generally covers accidental injury,
damage to another person’s property, and accu-
sations of libel or slander. The policies should
cover accidents that happen on business prem-
ises or while using business property such as
an automobile. As a sole owner of the business
with no employees, you might not need liability
coverage. However, as your business grows and
you add employees, you are likely to need liabil-
ity insurance.
Worker’s Compensation Insurance. Worker’s
compensation insurance reimburses employees
who cannot work because of injury suffered on
the job. Most states require employers to carry
worker’s compensation insurance.
Fire and Interruption-of-Service Insurance.
There are a variety of policies to cover losses
from fire. A blanket policy offers comprehensive
protection for damage from a range of sources—
lightning, hail, wind, explosion, arson, smoke
damage, and sprinkler leakage. Other policies
only cover the burned building. Interruption-of-
service insurance compensates you for business
income lost due to illness, fire, or theft. Premiums
are usually low, so it is affordable protection.
Some policies include this coverage, while others
require you to purchase extra coverage.
Burglary Insurance. Because the definition of
burglary ranges from policy to policy, it is criti-
cal to choose a policy that fits the particular


needs of your business. Your most expensive
equipment should be fully covered.
Natural Disaster Exclusions. Most insurance
companies do not cover damage from “acts of
God” such as hurricanes, tornadoes, floods, and
hail. Although there are a few companies that
do offer natural disaster coverage, the federal
government usually compensates for such dam-
age in the form of disaster relief funds and loans.
In addition to private insurance companies, the
federal government also offers fire and theft in-
surance. Find out the details by writing to the

Federal Crime Insurance
P.O. Box 41033
Washington, DC 20014

Health Insurance. When you work for yourself,
you no longer have the luxury of employer-paid
health insurance. To protect yourself financially,
never go without health insurance. Under the
Consolidated Omnibus Budget Reconciliation
Act (COBRA) of 1986, an employee who leaves
a job is entitled to remain with the company’s
group healthcare coverage for 18 months after
leaving. This is an excellent way to insure your-
self while you shop around for another policy.
To take advantage of lower group rates, you can
join a professional association with a group in-
surance policy. Some associations offer HMO
coverage and other health plan options. Choose

a plan based on your healthcare needs. If you do
not visit the doctor often, you may opt for cov-
erage limited to hospitalization. You should also
consider whether you need coverage for your
family. Many plans cover spouse’s insurance
needs, so you may not need an additional plan.
Disability Insurance. Although you may be
covered for medical treatment, you could be in
trouble if an illness forces you out of work, par-
ticularly if you are single and without any other
income. Take out as much disability insurance
as you can afford, because your operating costs
will continue even if your income does not. If
you have expensive overhead, look into BOE
(business overhead expense) insurance to cover
your operating expenses while you are out of
commission. Although policies vary, basic plans
based on the amount of revenue you earn cover
your office and employee expenses.
Life Insurance. An unmarried entrepreneur
with no children is unlikely to need life insur-
ance. Even so, you may want to consider it be-
cause as the owner of a small business, if you die,
the entire operation probably will collapse.
Partnership Insurance. If you have a business
partner and your partner dies, partnership in-
surance covers his or her share of the business as
a property asset. However, when a partner dies,
the partnership is legally dissolved. With insur-
ance, someone can inherit the partner’s share,
the share can be “bought out,” or a new partner-
ship can be formed. In many cases, the deceased
partner’s shares are bought by the original part-
ner in order to prevent outsiders from buying
in. Adequate insurance provides the cash to do
this and can prevent liquidation of the business.


 New
 Change
 Revise
 Reopen

go to


JT-1/UC-001 (7/11)

Section A: Taxpayer Information (Print legibly or type the information on this application.)

4. Legal Business Name / Owner / Employing Unit *

5. Business or “Doing Business As” Name *

8. Mailing Address (Street, City, State, ZIP code) *

10. Email Address

12. Physical Location of Business (Street, City, State, ZIP code) Do not use PO Box or Route No. *

11. Is your business located on an Indian Reservation?

ADOR 10194 (7/11)

For additional business locations, complete Section B-12

Bonding Requirements: Prior to the issuance of a Transaction Privilege Tax license, new or out-of-state contractors are required to post a Taxpayer Bond
for Contractors, unless the Contractor qualifi es for an exemption from the bonding requirement. The primary type of contracting being performed determines
the amount of bond to be posted. Bonds may also be required from applicants who are delinquent in paying Arizona taxes or have a history of delinquencies.
For more information on bonding, please see the “Taxpayer Bonds” publication, which is available online or at the Department of Revenue offi ces.

9. Country

A. Name (Last, First, MI) * B. Soc. Sec. No. * C. Title * E. Complete Residence Address * F. Phone Number *

7. Fax Number

IMPORTANT: Incomplete applications WILL NOT BE PROCESSED. All required
information is designated with asterisk *
To complete this application see attached instructions. Please return Complete
application with appropriate license fee(s) to: License & Registration Section,
Department of Revenue, PO BOX 29032, Phoenix AZ 85038-9032.

To complete this online,

1. License Type (Check all that apply) *
Transaction Privilege Tax (TPT)
Withholding/Unemployment Tax (if hiring employees)
Use Tax
TPT For Cities ONLY

3. Federal Employer Identifi cation Number (Required for Employers and
Entities other than Sole Proprietors) or Social Security Number *

Individual / Sole Proprietorship Sub-Chapter S Corporation
Partnership Association
Professional Limited Liability Trust
Limited Liability Company Government
Limited Liability Partnership Estate
Corporation Joint Venture
State of Inc. Receivership
Date of Inc.

2. Type of Ownership *

Tax exempt organizations must attach a copy of the Internal Revenue Service letter of determination.

6. Business Phone Number *

Yes If yes, (See Section G for listing of Reservations)

13. County

14. Are you a construction contractor? *

(See Bonding Requirements below)
15. Did you acquire, or change the legal form of business of, all or part of an existing business? *


If yes, you must complete the Unemployment Tax Information (Section D)

16. Description of Business (Must include type of merchandise sold or taxable activity; for employers, the type of employment) *

18. Identifi cation of Owner, Partners, Corporate Offi cers, Members / Managing Members or Offi cials of this employing unit

17. NAICS Code: (Select at least one. Go to for a listing of codes) *

If the owner, partners, corporate offi cers or combination of partners or corporate offi cers, members and/or managing members own more than 50% of or
control another business in Arizona, attach a list of the businesses, percentages owned and unemployment insurance account numbers.

D. % Owned *


Acct. No. LIAB

Start LIAB Est.

S/E Date




Figure 4: Sample joint tax application. Each municipality varies so be sure to contact your Small Business Administration
or County Clerk to make sure you f ile the correct documents.

Licenses and
Whenever anyone starts a company, the govern-
ment wants to know about it. The government
wants to make sure the business complies with
the laws that protect businesses and customers,
and the government wants its fair share of taxes.
In this section, we will look at the common laws
and regulations you must comply with when you
establish and operate a business. Remember,
regulations vary from state to state and city to
city, and they change frequently. Contact your
state and local government to get the exact in-
formation that applies to your business. Most
local governments publish useful guides that

tell you everything you need to know to estab-
lish a business.
Business Licenses. Just as every driver must
have a license to drive a car, in most states every
business must have a license to operate legally.
Business licenses and permits are issued by lo-
cal city or county governments. The fees range
from a few dollars to several hundred dollars.
The exact cost usually depends on two things:
the type of business you have and how much
gross income you make in a year. Gross income
is how much your business receives in income
before you deduct expenses and taxes.
State Licensing. Some business owners must
also be licensed by the state or by the federal
government. Common examples of these in-
clude doctors, attorneys, and certified public
accountants. If your profession requires a state
license, your local city or county office will let


you know. Most state licenses have education
and training prerequisites, and most require a
written examination.
Seller’s Permit. If a business sells products to the
public, it must have a seller’s permit, also known
as a resale certificate. The seller’s permit enables
a business to buy products at wholesale prices to
resell at retail prices to customers without pay-
ing sales tax to the wholesale vendor. When you
sell products to your customers, you collect sales
taxes from them. A seller’s permit ensures that
the government collects its sales tax only once
for the product — not twice.
To obtain a seller’s permit, contact your state of-
fice of taxation. If you have any doubts about
whether you are selling a service or a product,
talk to the state office and describe your busi-
ness. They will advise you on what to do. Your
city and county government can tell you which
state office to call.

Zoning and the
Home Business
Zoning is a method of dividing a geographic
area into different uses. The reason for zoning
is simple: people want to live in quiet residential
neighborhoods, not next to noisy factories or
job sites. In addition, business owners prefer to
sell their products in locations that attract cus-
tomers. If you plan on opening a home-based
business, zoning is an important consideration.
There are four basic zoning classifications: resi-
dential, commercial, industrial, and agricultural.
Zoning laws are passed by each community and
are enforced by the community’s zoning boards.
The laws vary widely. Most communities al-
low home businesses to operate in residential
zones. However, some do not. Those that do
operate in residential zones have limitations and
How to Get a Zoning Permit. Zoning regula-
tions are created at the city or county level of
government. To get information about zoning,
contact your local planning department or zon-
ing administration. In most areas, when you ap-
ply for a business license, the office will ask you
whether you are starting a home business and
how to comply with zoning laws.
Homeowner (HOA) and Condominium
(COA) Association Rules. Many homeowner
and condominium associations prohibit home
businesses. The primary reason for this is to re-
strict any activity which would generate exces-
sive noise, traffic, parking, or contribute to the
deterioration of property and property values.
These rules are often included in the deed to
the property or may be obtained by contacting
either a board member of the association or the
management company that oversees compliance


Here is a checklist to help you remember
everything you need to do to start your

business legally:

• Get a business name

• Check state licensing requirements

• Check zoning regulations and

• Apply for seller’s permit or resale
certificate (if applicable)

• Register your business name.


Figure 5: Although most communities allow home businesses, there are often restrictions and limitations as shown in this
sample zoning form.


and administration. It is important to check the
ownership agreement carefully before you start
a business in your home. If you are renting, it is
necessary to contact the landlord for permission
to run a business from their property in addition
to securing any HOA or COA regulations.

What can you do if your home is not zoned for
business? You can either adjust your business or
get around the rules by securing a use permit or
a variance.
Adjusting Your Business. The first option is
simply to adjust your business to comply with
restrictions. For example, if you are prohibited
from selling retail products, you can use direct
mail or hire a sales representative. If manufac-
turing is involved, you can subcontract the work
to another company. If the restriction is as sim-
ple as no parking or limited parking for visiting
clients, you can arrange to meet clients in their
offices, or sign a parking space disclosure form.
Use Permits and Variances. Another option is
to get a special exception to the rules. A use per-
mit allows certain businesses to operate in ar-
eas that are not zoned for that type of business.
These uses fall under special exceptions that
zoning ordinances take into account. In other
words, they are exceptions that communities an-
ticipated when they wrote the regulations.
A variance, on the other hand, is a request for an
exception to the rules. The community does not
expect it or plan for it. A variance is granted by a
zoning board or similar group and requires you

to submit an application and make your case at a
public hearing. You may be able to get a variance
if you can prove each of the following:
1. That your business will not harm the


2. That prohibiting your business would
deprive you of making a living.

3. That your business is professional.

Before you apply for a variance, it is a good idea
to talk to a lawyer. Zoning boards do not like
to grant variances, so you must be prepared to
make a convincing case.

A wide variety of laws regulate trade at the state
and federal levels. These laws are designed to
protect both businesses and consumers. The
government regulates credit practices, employee
rights, occupational health and safety — every
conceivable aspect of business.
As a small business owner, you will not have to
worry about many of the regulations that con-
trol business activity. But remember, it is up to
you to know which laws apply to your business.
The government will not send any officials to
your door to explain the regulations.
For more information, talk to your city or coun-
ty office. They will tell you what you need to
know and where to get more information. You
can also contact your state government or the
Federal Trade Commission.


Choosing Your
Business Structure
If you are going into business, you should be-
come familiar with legally recognized business
structures and decide which is best for you. For
most businesses, the main choices are a sole pro-
prietorship, a partnership, limited liability com-
pany or a corporation. While most one-person
businesses are sole proprietorships, this form of
business has the most risk.
Each business structure has advantages and dis-
advantages. If you do not choose — that is, if
you do nothing — you will au tomatically be a
sole proprietor in the eyes of the law. If you go
into business with two of your friends and do
not put the rela tionship in writing, you will be
considered a partnership. The limited liability
company and corporation require formal legal
action to establish. You must contact an attorney
or utilize an online legal document prepa ration
service such as LegalZoom.

A sole proprietorship is the simplest business en-
tity. In legal terms, you and your business are
one and the same. The sole proprietorship is the
easiest and least expensive business structure to
set up. All you need to do is follow the steps
outlined in this lesson and you are in business.
The sole proprietor is subject to very few regu-
lations or legal requirements. You do not have
to report to anyone else and no one reports to
you. In every sense of the word, you are your
own boss.
Tax Consequences. The tax consequences of
being a sole proprietor are simple. Since you
are the business, your net business income is re-
ported on your personal income tax return, and
you pay regular income taxes on it as an indi-
vidual. Net business income is what is left over

after you deduct business expenses from your
gross income, which is the actual amount of
money you receive.
Liability. Since you are the only person respon-
sible for your business, you are also the only per-
son responsible for any of its obligations. This
is known as unlimited personal liability. Personal
liability can be a serious disadvantage of sole
proprietorships, depending upon the type of
business you are in.
For example, say you order $10,000 worth of
supplies. Unfortunately, business slows down
and you do not make enough money to pay for
the supplies. As a sole proprietor, you are per-
sonally liable for the entire amount, even if you
have to pay back the money by selling your car
or by getting a personal loan.
Transfer of Interest. Since a sole proprietorship
is no more or less than its owner, it lives and
dies with you. That means if you die or become
incapacitated in some way, your business ceases
to operate. Also, relationships between your
business and your creditors, customers, and em-
ployees can be difficult to untangle. Finally, it
is not easy to transfer legal ownership of a sole
proprietorship to your children or to anyone else
you might choose.

A partnership is an association of two or more
people who run a business for profit. A partner-
ship is an opportunity to team up with others.
Partnerships with two or more partners who
have roughly equal status are sometimes called
general partnerships.
Partnerships are legally recognized business
entities, even if the partners do not draw up a
written partnership agreement. Of course, it is
a good idea to draft a partnership agreement
if you are considering forming a partnership.
Except for the agreement, a partnership is as
easy to set up as a sole proprietorship. There are
minimal reporting requirements.


Tax Consequences. Like a sole proprietorship, a
partnership is a tax reporter, not a taxpayer. That
is, any income you receive from a partnership is
reported on your personal income tax return and
taxed as regular income, just like in a sole pro-
prietorship. Each partner can deduct his or her
share of losses for that year from income earned
from other sources.
Liability. Unlike a sole proprietorship, a part-
nership has more complicated liability arrange-
ments. Not only do you have unlimited personal
liability, but your partners do too. For example,
each partner is liable for all the partnership
debts. The result? Well, if you are 50-50 partners
with your friend and your friend skips town to
avoid a debt, you are stuck with 100 percent of
the debt.
In a partnership, each partner is an agent of all
the other partners. That means each partner can
bind the other partners in a contract. That is
why it is vital to have clear agreements that state
exactly who is responsible for what.
Transfer of Interest. As an individual partner,
it is not difficult to transfer your interest in a
partnership or to be bought out by your fellow
partners. But in such circumstances, the part-
nership agreement must be rewritten. And if the
partnership owns property, it is hard to separate
each partner’s share or to transfer the entire
partnership to other partners.

A Limited Liability Company (LLC) is a unique
business struc ture that combines features from
both the corporation and partnership models,
while providing businesses with several taxation
and management options. An LLC is allowed
by state statute and therefore each state may
use different regulations. If you are interested
in starting a Limited Liability Company, you
will need to check with your state to determine
require ments and federal tax regulations. A few
types of businesses cannot be LLCs, such as
banks and insurance companies, and there are
special rules for foreign LLCs.


Owners of an LLC are called members and
most states do not restrict ownership, so mem-
bers may include individuals, cor porations, oth-
er LLCs, foreign entities, and “single-member”
LLCs — those having only one owner.
Tax Consequences. Companies formed under
an LLC must elect to be taxed like a sole propri-
etorship, a partnership, or a corporation. If elect-
ing to be a sole proprietorship or partner ship, an
LLC avoids federal income taxes on company
prof its because there is no taxation at the com-
pany level; instead, profits are distributed to the
members to be reported on their individual tax
returns. But if an LLC business elects a corpora-
tion tax classification, it faces double taxation as
its profits are taxed at the corporate level and
again when distributed to the members to be
reported on their individual tax returns. The
reason an LLC may choose this classification
is to save money on company profits, as corpo-
rate tax rates are lower than in dividual tax rates.
Doing this also separates company profits from
the owner’s income, which can then be used to
support the business.
Subchapter S Corporation. If you select to have
your LLC treated as a corporation for tax pur-
poses, you will often elect to be treated as an
S Corporation. Basically, this will eliminate the
double taxation and the members will be taxed
like a partnership.. The federal govern ment’s
Subchapter S regulations allow small businesses
to en joy corporate advantages — such as limited
liability — without being responsible for corpo-
rate taxes. In a way, Subchapter S corporations
let you have your cake and eat it too.
Liability. One of the major benefits of an LLC
is the limited liability protection it provides its
members. Setting up an LLC is less expensive
and requires less paperwork than a cor poration
but still receives the same protections. In some

states there may also be additional protection
through charging orders. The structure of an
LLC allows a company to convert into a cor-
poration or S corporation if it needs to do so,
and members are not held financially or person-
ally liable for the company’s debts or for actions
of the company resulting in a lawsuit. However,
members of an LLC as with a corporation busi-
ness do not have total liability protection and
can be legally responsible for certain actions: the
corporate or limited liability protection does not
apply to fraud, negligence, or personally guaran-
tees on a debt repayment.
Asset Protection. Depending on your state, the
LLC may offer the best form of asset protec-
tion. While both a corporation and an LLC can
protect one’s personal assets from debts of the
company, only the LLC in certain states may
protect your business assets from personal li-
ability. Imagine a car accident where a child is
injured. With a corporation, partnership, or sole
proprietorship you could loose your business if
the liability exceeds the insurance coverage. The
same could happen if you have to file bankrupt-
cy. Many states have charging order protection
for LLCs. In these states, it is possible to struc-
ture your LLC so that the business assets may
not be at risk from personal liability. You should
discuss your specific issues with a lawyer to de-
termine if a properly structured LLC can offer
you additional protections.

A corporation is a commonly misunderstood
business structure. Most people think of corpo-
rations as large, impersonal com panies that em-
ploy hundreds of people. Yet there are corpora-
tions that consist of a single stockholder. The
key distinction between a corporation and other
business structures is that a corporation is a


Figure 6: Corporations are the most complicated
business structures to establish. It’s best to seek
professional advice when setting up a corporation.

legal entity, separate from its owners and stock-
holders. It is actually considered a “person” in
the eyes of the law.
Unlike other business structures, a corporation
may be compli cated and expensive to set up,
and has many reporting require ments. Formal
documents, such as articles of incorporation,
as shown in Figure 6, must be drawn up and
submitted to the government. Minutes of meet-
ings must be taken. A board of directors must
be chosen.
Tax Consequences. Unlike other business struc-
tures, corpora tions pay taxes on corporate earn-
ings. When these earnings are distributed to
you as dividends, you must include them in your
personal income tax return and pay additional
taxes. So, if you are a stockholder (even the only
stockholder), you are being taxed twice: once as
a corporation and once as an individual receiving

corporate dividend income. This is an obvious
disad vantage to incorporating your business.
Liability. Perhaps the biggest advantage of a
corporation is limited personal liability. Again,
this is a result of the cor poration’s status as a sep-
arate legal entity. If an employee is injured and
there’s a judgment against the corporation, as a
shareholder you stand to lose only the amount
of money you have invested in shares. Your
personal property cannot be used to satisfy the
judgment. Similarly, if your corporation borrows
money but cannot pay it back, the bank cannot
use your per sonal assets to pay off the debt.
Transfer of Interest. A corporation has a per-
petual and sepa rate existence apart from its
stockholders. Therefore, it is easy to transfer in-
terest to a family member, to another person, or
to another company by selling the corporation
or by issuing or selling stock. In fact, one of the
reasons corporations were in vented was to make
transfers of interest easy. This helps busi nesses
raise money and develop new companies.
Subchapter S Corporation. There is anoth-
er type of corpora tion called a Subchapter S
Corporation. Basically, this is a cor poration that
is taxed like a partnership. The federal govern-
ment’s Subchapter S regulations allow small
businesses to en joy corporate advantages — such
as limited liability — without being responsible
for corporate taxes. In a way, Subchapter S cor-
porations let you have your cake and eat it too.
How do you choose the most appropriate struc-
ture for your business? In most cases, the choice
of business structure is obvious. The vast ma-
jority of one-person businesses, such as home-
based businesses, are sole proprietorships but
these have the highest risk of loss as they do
not protect the business from personal liability
nor the person from business liability. Many stay
that way from beginning to end. Obviously, if
you want to work with others, you must either
choose a partnership, limited liability company,
or a corpora tion. Some businesses start with one


structure, then change to another. A small part-
nership may grow, hire employees, lease or buy
a building, and turn into a limited liability com-
pany or corporation.

Most lawyers or online services will provide
you with various documents depending on the
type of entity you choose. Unfortunately, most
of these documents deal with traditional is-
sues that most businesses face but do not deal
with the unique legal issues that businesses in
the firearms industry deal with. Many operating
agreements, shareholders agreements or corpo-
rate bylaws deal with issues like the death of a
member or shareholder, bankruptcy, or divorce
but rarely do you find one that has provisions to
deal with the changes in the status of a mem-
ber, shareholder, or partner that would change
the ability to deal with firearms and ammuni-
tion. There are state and federal issues regarding
firearms and the owners and managers of the
various entities that should be included in the
company’s documents. Company documents
with these provisions can help you and the oth-
ers involved with the business understand the
procedure, duty, and responsibility of each when
events happen that could put individuals at risk
of criminal liability or cause the loss of the FFL
because of legal violations.

Perhaps no issue is more important or more
confusing to a business owner than taxes. The
Internal Revenue Service (IRS) offers a great
deal of information, but it is not in the business
of educating business owners in the details of
tax laws. It is up to you to learn how to maneu-
ver in the tax jungle and to get the right kind
of help.
This section covers many of the main things
you need to know, but it is not comprehensive,
and it may not be current by the time you read
it. Tax laws are always changing, and you must
keep up-to-date. Always consult the IRS for
the latest rules, as the IRS provides many use-
ful publications. An especially good one is IRS
publication 334 (Figure 7), the Tax Guide for
Small Business.Above all, it is strongly advised
that you consult with a CPA or tax attorney to
insure that you are in compliance with all tax
laws. Remember, this lesson is not a substitute
for professional advice!
Which tax laws apply to self-employed people?
A self-employed person operating as a sole pro-
prietor must pay federal income and social se-
curity taxes as well as state taxes, just as if he
or she worked as an employee of a company. In
addition, a self-employed person is responsible
for the following taxes:
• Business license and tangible personal

property sales tax
• Sales tax
• Self-employment tax
• Estimated taxes


As we mentioned before, you must have a per-
mit to sell products. When your customers buy
those products, they pay you sales tax. This tax
is owed to your state government, unless you live
in a state with no sales tax. If you offer profes-
sional services, you may not have to charge sales
tax, but the rules and definitions differ from
place to place. In some communities, certain
products of service businesses are taxable.
If you collect sales tax, you must prepare
monthly, quarterly, or annual sales tax returns.
In some states, you can keep a portion of the
sales tax you collect as payment for the cost of
collecting it.

All sole proprietors, partners, and independent
contractors must pay social security taxes.
Self-employment tax is social security tax for
self-employed individuals. If your business
makes less than a certain amount in profits, you
owe no tax. If it makes more (combined with any
other income), you owe a percentage in tax. Self-
employment tax is paid in addition to federal in-
come tax and state property taxes. If you work for
yourself and at a regular job where social security
is withheld from your pay, you combine the two
incomes to calculate the maximum self-employ-
ment tax you owe. Federal form 1040, Schedule
SE can help you figure out whether you should
file self-employment taxes (Figure 8).

We have already discussed the business license
and how license fees are calculated. The fee you
pay for the license is a tax. You may also have to
pay a tax on personal property that you use in
your business. This is usually referred to as tan-
gible personal property and includes furniture,
fixtures, machinery, and tools. You must itemize
each piece of property you use in your business,
state the date you bought it, and its original pur-
chase price. The tax is calculated on the basis of
the total value of your property.

Figure 7: Tax Guide for Small Business is really useful
in staying up-to-date with current tax information.


Figure 8: Self-employment tax is paid in addition to federal income and state property taxes.

(Form 1040)

Department of the Treasury
Internal Revenue Service (99)

Self-Employment Tax
▶ Information about Schedule SE and its separate instructions is at

▶ Attach to Form 1040 or Form 1040NR.

OMB No. 1545-0074

Sequence No. 17

Name of person with self-employment income (as shown on Form 1040) Social security number of person
with self-employment income ▶

Before you begin: To determine if you must file Schedule SE, see the instructions.

May I Use Short Schedule SE or Must I Use Long Schedule SE?

Note. Use this flowchart only if you must file Schedule SE. If unsure, see Who Must File Schedule SE in the instructions.


Did you receive wages or tips in 2012?


▼ ▼ ▼

Are you a minister, member of a religious order, or Christian
Science practitioner who received IRS approval not to be taxed
on earnings from these sources, but you owe self-employment
tax on other earnings?



Are you using one of the optional methods to figure your net
earnings (see instructions)?



Did you receive church employee income (see instructions)
reported on Form W-2 of $108.28 or more?



You may use Short Schedule SE below

Was the total of your wages and tips subject to social security
or railroad retirement (tier 1) tax plus your net earnings from
self-employment more than $110,100?



Did you receive tips subject to social security or Medicare tax
that you did not report to your employer?




Did you report any wages on Form 8919, Uncollected Social
Security and Medicare Tax on Wages?


▶ You must use Long Schedule SE on page 2

Section A—Short Schedule SE. Caution. Read above to see if you can use Short Schedule SE.

1a Net farm profit or (loss) from Schedule F, line 34, and farm partnerships, Schedule K-1 (Form
1065), box 14, code A . . . . . . . . . . . . . . . . . . . . . . . . 1a

b If you received social security retirement or disability benefits, enter the amount of Conservation Reserve
Program payments included on Schedule F, line 4b, or listed on Schedule K-1 (Form 1065), box 20, code Y 1b ( )

2 Net profit or (loss) from Schedule C, line 31; Schedule C-EZ, line 3; Schedule K-1 (Form 1065),
box 14, code A (other than farming); and Schedule K-1 (Form 1065-B), box 9, code J1.
Ministers and members of religious orders, see instructions for types of income to report on
this line. See instructions for other income to report . . . . . . . . . . . . . . 2

3 Combine lines 1a, 1b, and 2 . . . . . . . . . . . . . . . . . . . . . 3
4 Multiply line 3 by 92.35% (.9235). If less than $400, you do not owe self-employment tax; do

not file this schedule unless you have an amount on line 1b . . . . . . . . . . . ▶ 4
Note. If line 4 is less than $400 due to Conservation Reserve Program payments on line 1b,
see instructions.

5 Self-employment tax. If the amount on line 4 is:
• $110,100 or less, multiply line 4 by 13.3% (.133). Enter the result here and on Form 1040, line 56,
or Form 1040NR, line 54
• More than $110,100, multiply line 4 by 2.9% (.029). Then, add $11,450.40 to the result.
Enter the total here and on Form 1040, line 56, or Form 1040NR, line 54 . . . . . . . 5

6 Deduction for employer-equivalent portion of self-employment tax.
If the amount on line 5 is:
• $14,643.30 or less, multiply line 5 by 57.51% (.5751)
• More than $14,643.30, multiply line 5 by 50% (.50) and add
$1,100 to the result.
Enter the result here and on Form 1040, line 27, or Form
1040NR, line 27 . . . . . . . . . . . . . . . 6

For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 11358Z Schedule SE (Form 1040) 2012


Regular employees get a portion of their taxes
deducted from their paychecks every pay pe-
riod. If you are a sole proprietor or a partner,
the government also wants some of your money
on a regular basis. Therefore, you must make
estimated tax payments every quarter. The pay-
ments are due January 15, April 15, June 15, and
September 15.
How to Estimate Your Taxes. There are several
ways to estimate your taxes. The simplest way
to avoid penalties and pay what you owe is to
base your estimates on the previous year’s tax.
Divide your last year’s total tax by four and pay
at least that much in estimated taxes each quar-
ter of the present year. There are other methods
you can use to estimate taxes, but they are so
complicated you may need professional advice
to use them.

The profits from sole proprietors, partnerships,
independent contractors are now subject to a
new 3.8 percent tax for healthcare. Most corpo-
rations and limited liability companies are cur-
rently exempt from this tax on the profits. You
should check with a CPA before picking your
business structure to determine if you will be ex-
empt from this tax or not. In many cases spend-
ing a little money up front to pick the proper
business structure can save you a lot of money
and provide additional benefits for many years
to come.

As a business owner, you are entitled to deduc-
tions for the expense of operating your business.
You can claim two kinds of deductions: expenses

for maintaining a home office, and regular busi-
ness deductions.
Home Office Deductions. If you plan to set
up a home office and want to claim it as a de-
duction, your home office must qualify as such
according to IRS rules. The IRS has two basic
criteria your home office must meet to qualify:
exclusive and regular use, and principal place of
Exclusive use means that your home office must
be used exclusively and regularly for business
and nothing else. The office does not have to
be a separate room, but it must be a separate
and identifiable place. You can use a breakfast
nook or a section of your family room for busi-
ness, but it must be very clear that it is a separate
place for your business and nothing else.
Regular use means that you use the space daily for
so many hours a week. If you do not use the area
regularly, the IRS may regard it as “incidental or
occasional use” and disallow your deduction.
The second criterion requires your office to be
used as your principal place of business or as a
place used by your clients in the normal course
of business. For example, if you have a regu-
lar job in addition to your home business or if
you work in more than one location as part of
your home business, to qualify you must spend
a significant portion of your time in your home
office. If you work at home four days a week
and one day at an outside job, your home is your
principal place of business. But if it is the other
way around, your home office may not qualify.
However, even if your home office is not your
principal place of business, you can deduct home
office expenses if, in the normal course of your
work, you see clients at home.


Figure 9: Publications are available from the IRS to
help determine what documents are needed and when/
how to f ile your taxes properly.

All legitimate business expenses are deductible
when computing your taxable income, as long as
they meet three basic roles.
1. The expenses must be incurred in con-

nection with your business.
This means just what it implies: the ex-

pense must be an actual business (not
personal) expense. Taking a client out for
lunch to discuss business is an expense
incurred in connection with your busi-
ness. But just going out to eat while you
are working at a client’s office is not a
business expense.

There are some expenses that are both
personal and business. The most common
example is your car. The IRS allows you
to divide your auto expenses into personal
and business expenses and to deduct the
business portion. If you plan to claim your
car as a business expense, you should keep
a mileage log.

2. The expenses must be “ordinary and

“Ordinary” and “necessary” refer to ex-
penses common to your type of business.
Photocopying is a common expense for
self-employed people. Buying paints, can-
vases, and sable brushes is not.

3. The expenses must be reasonable.
Obviously, “reasonable” is not an exact

term, and the IRS makes certain judg-
ments about what is and is not reasonable.
If your business only grosses $5,000 a year
but you claim $100 lunches with clients
every week, your claim is going to raise
some eyebrows at the IRS.

There are as many types of business expenses as
there are businesses. For example, listed below
are some of the common deductible expenses
listed by the IRS on Schedule C:

• Advertising
• Automobile expenses
• Business licenses
• Depreciation
• Dues and publications
• Utilities
• Postage
• Office expenses
• Supplies
• Travel, meals, and entertainment

We will not discuss every possible deduction in
this lesson. A tax specialist can help you deduct
every legitimate expense.


The IRS does not prescribe any specific ac-
counting records or documentation. But you
need to keep careful records to comply with tax
regulations, to show proof of tax deductions, and
to show values of assets in case of an insurance
claim after a loss. The information you need for
tax purposes includes the following records of
income items and deductions:
1. Federal income statements (supplied to

you by your clients)
2. Auto mileage logs
3. Business expense receipts
4. Office expense receipts
5. Documentation of your business

equipment for potential insurance claims
How long should you keep your records? At
least three years for most records. Many accoun-
tants recommend a longer period — five years
or the life of the business for documents such
as a partnership agreement or articles of incor-
poration. But record keeping for tax purposes
is just one aspect of overall business accounting
and record keeping.

Although the vast majority of businesspeople do
not get audited, many worry about it. The IRS
audits less than 2 percent of all returns. Yet many
people are unnecessarily afraid to claim legiti-
mate deductions for fear of triggering an audit.

Figure 10: Keeping careful tax and accounting records is
important in protecting yourself in case of an audit and
allows you to plan for the future.

The IRS checks all tax returns for mistakes in
arithmetic. If you have made an error, you will
be notified. An error is just that: it will not in-
crease your chances of being audited.
Knowing the tax laws and keeping complete re-
cords are the best ways to avoid an audit and to
protect your business if you are audited.
Never throw receipts away. Keep bank state-
ments and canceled checks for several years.
Keep all your records up-to-date. If you do not
understand the tax regulations — and very few
people do — get help from a CPA.


Figure 11: SCORE offers handy templates, seminars
and tools to help you in your business planning.

Where to Go for
As we have said before, planning is the single
most important factor in the success of a new
business. Where can you go to get help planning
your business? Here are some suggestions.
SBA: The U.S. Small Business Administration
(SBA) is an independent agency of the fed-
eral government that provides aid, counsel-
ing, assistance, and protection to the interests
of small business concerns. SBA provides free
individual face-to-face and internet counseling
to help you manage your business from start
to finish, expand your business through new
programs and services, increase your business
knowledge and productivity, and support your
business through administering loan guaranty
programs. Your local SBA can assist you in
starting a business in your state and make you
aware of local laws and ordinances that may
only apply to your city or state.
To find out more about SBA, visit its website at, call toll-free at 1-800-827-5722.
SCORE: The Service Corps of Retired
Executives (SCORE) is a group of experi-
enced businesspeople who help draft business
plans and lend free advice on everything from
incorporation to marketing strategies. Score
offers information on a myriad of topics from
“Advertising Your Business Using Social Media”
to “Cash Flow Projection.” Their website offers
templates and tools to help your business grow
and stay growing. Contact the U.S. Department
of Commerce in the U.S. Government listings
of your local phone book for more information
on SCORE programs in your area, or visit the
SCORE website at
The National Federation of Independent
Business (NFIB): NFIB is a small business
advocacy association representing small and
independent businesses in Washington and all
50 state capitals. Its mission is to promote and

protect the rights of its members to own, oper-
ate, and grow their businesses. NFIB also helps
its members to be competitive in the market-
place by pooling the purchasing power of its
members by giving them access to many busi-
ness products and services at discounted costs.
NFIB provides timely information designed to
help small businesses succeed. For information,
visit the NFIB website at or call
Small business cooperatives around the country
offer shared low-rent office space and shared
secretarial, copying, and fax services. The centers
are often sponsored by universities, nonprofit
associations, and state or local governments.
Many universities and community colleges
offer seminars and lectures in small business
management to assist start-up companies with
finances, marketing, and contracting. Lectures
and seminars include subjects such as how to
start a business, where to get capital, and how
to prepare taxes.
A Certified Public Accountant (CPA) or tax
attorney who specializes in small businesses is
a good place to start when beginning your new
business. A tax advisor experienced with small
businesses can help you set up your record-keep-
ing system now and help you take advantage of
all possible tax deductions.


Should You Do It Yourself ? 60
Hiring A Designer 61
Hiring An Agency Or Consultant 63

The Capabilities Brochure Or Resume 65
Referrals 66

Newspapers 68
Professional Or Trade Magazines 69
Directories 70

Writing Effective Direct Mail Letters 74
Compiling A Mailing List 74
Putting Together A Direct Mail Package 75
Direct Mail Follow-Up 76


Publicity 79
Press Releases 79
Television And Radio Appearances 80
Writing Articles 81
Blogging 81
Teaching Courses And Seminars 82
Networking 82
Specialty Promotions 83
Pro Bono and Volunteer Work 83

hapter 3 – P

oting Your B



Advertising and
Your business could be the best in the nation, but
the people who need your services must know
you exist and where to find you. You have to tell
people about your business — or get others to
tell them for you. Ideally, you should do both.
Marketing, advertising, and promotion bring
you business. Marketing involves a plan to make
people aware of your business and persuade them
to become your customers. Advertising is carry-
ing out the plan. It is also more costly. You can
buy space for a printed advertisement in a news-
paper, magazine, directory, or other publication.


You can also advertise on the internet, or you
can buy airtime on radio or television.
Promotion can be free, or at least lower in cost
than advertising. But promotion takes up much
more of your time than advertising. Promotional
techniques include making personal appear-
ances and giving speeches, teaching, sponsoring
various causes, offering premiums and coupons,
and volunteering your services or time.
Publicity that gets your business mentioned in
news stories is one form of promotion. Publicity
is a form of public relations, rather than ad-
vertising. Effective publicity has much greater
credibility than advertising because a third party
delivers the message. Of course, you cannot con-
trol your publicity as you can your advertising,
so publicity can backfire on you if it is nega-
tive. Finally, you can reach customers through
e-blasts, direct mail, referrals, and by responding
to help-wanted ads.

The easiest way to advertise and promote your
business is to hire someone to do the work for
you; but that also can be the most expensive way.
First, you need to determine if you have enough
money to spend on advertising and promotion to
make hiring someone worthwhile. That means
setting up an advertising and promotional bud-
get. But before you budget for advertising and
promotion, make sure your business is ready to
give top-notch service and that your employees,
if you have any, are fully trained for their jobs.
Next, locate your potential customers. The more
you know about them — what they read, where
they look to find services — the better you can
structure your ad and promotional program.
This helps you pinpoint your target market. Use

the information you gather for your marketing
plan to identify prospective clients.
The best method of developing an advertising
and promotional budget is the percentage of
sales method. Project your expected sales for the
next year, and then decide what percentage you
want to spend on advertising and promotion.
Then, calculate your monthly advertising expen-
diture. As a guide, most small service businesses
spend from 1 percent to 10 percent on advertis-
ing and promotion. For example, if you project
sales of $80,000 and plan to spend 5 percent on
advertising and promotion, you would budget
$4,000 for the year, or about $333 a month.
Of course, $333 a month will not interest an ad
agency or public relations agency, but that does
not mean you cannot advertise. You will have
to do more of the work yourself, or look for an
affordable contract graphic designer or public
relations consultant. Whatever alternative you
choose, keep track of your actual sales so that
you can adjust your spending quarterly to keep
pace with your business.
If your initial budget estimate comes up short,
you may want to consider using barter. Barter
is simply the exchange of services or goods for
other services or goods. No cash changes hands.
For example, a local printer or ad agency may let
you trade your services in exchange for printing
your brochure or airing your commercial.
Barter is an excellent way to help your business
along when work slows or when you are short of
cash. Barter works best if you are dealing with
someone you know, or if you can take advantage
of someone else’s slack time. Many communities
have commercial barter clubs or barter brokers
to give you help and information.


One criterion on which your business will be
judged is the appearance of your graphic mate-
rials: signs, posters, Yellow Page ads, newspaper
ads, brochures, business cards, and stationery.
These are the materials that will be making your
first impression. This is one area where hiring
an expert may be the best course of action.
It is important to have a consistent look for all
your stationery items (Figure 2). Design con-
sistency adds impact and helps people to iden-
tify the business. Extending your “look” to all
your advertising and promotional materials
makes the whole more effective than the parts.
Everything works together, pulling in the same
direction. When people see your business card,
they remember your direct mail. When they see
your direct mail, they remember your ad.
How do you get a unified look at low cost? You
could ask a good printer to show you design
concepts for stationery items or you could get a

graphic arts student from a nearby college to de-
sign a distinctive logo. It is best to use one pro-
fessional graphic artist or designer to design all
your advertising and promotional materials. Do
not make the mistake of hiring one person to do
a logo, another to do a direct mail piece, another
to create a web ad, and still another to prepare
a newspaper ad. The result is almost guaranteed
to be muddled.
Before you start looking for a graphic designer,
you should know exactly how much you could
spend. Designers’ rates can range from a mod-
est $25 to more than $150 an hour. Get written
estimates. Realize that the final costs can vary
10 percent from the estimate, much more if you
make changes while the job is in progress.
Once you know what you can afford, you can
begin your search. Start by asking business ac-
quaintances for referrals. If you see graphics
work that you like, call the company for whom
the work was done. The advertising, marketing,
or public relations manager should be able to

Figure 1: A percentage of your annual budget should be set aside for advertising and promotion.


in Engravin

g & Check

Jack Sprat


Office: 450

Cell: 450-20

Figure 2: Your marketing and stationery should all have a uniform look.

give you the artist’s name. If these steps do not
yield results, look in the Yellow Pages directory
under “Graphic Designers.”
Once you start working with a designer, describe
carefully the audience you want to reach and the
message you want to give. Try to meet with at
least three designers to review their portfolios.
However, before you schedule the meetings, dis-
cuss your budget with them on the telephone. It
may seem awkward, but it will save you and them
time if your budget cannot match their fees.
When you schedule an interview, ask the de-
signer to bring samples relevant to your project.
If you want a direct mail piece designed, ask to
see direct mail pieces done for other clients. And
make sure the work is the designer’s own; ask
point blank if he or she was responsible for the
design concept, or merely used another person’s
concept. Evaluate other factors, too. For exam-
ple, can you work comfortably with the person?
Does he or she seem too egotistical or unmoti-
vated? Are you thinking along the same lines?

Once you start working with a designer, de-
scribe carefully the audience you want to reach
and the message you want to give. Ask to see the
colors and typefaces that he or she plans to use.
Choose designs you like and that are suitable
for the intended audience. Show the designer
samples of concepts you prefer.
Approve the design at an early stage. Be sure
to ask the designer for thumbnails or comps.
Thumbnails are rough sketches of the design.
Comps are full-size, accurate mock-ups of the
finished piece. Because comps are more com-
plete, they will cost more. But they can help
you and the designer narrow down the design
choices, and in the long run they will save you
money. Make the fundamental decisions about
the project before the comp stage. Making radi-
cal changes that late in the process will cost you.
Proofreading copy is your responsibility, not
the designer’s. A change in just one letter can
change the message or create an embarrassing
mistake, so proofread carefully.


Set a reasonable deadline for the designer, but
include enough leeway to allow for emergencies
and equipment failures. Agree in advance when
payment will be due: perhaps one-third at the
start of the job, another third halfway through,
and the final third at completion.

While you may not have enough money in your
advertising budget for an ad or PR agency, you
may have enough to hire a independent con-
tractor as your advertising, public relations, or
marketing consultant.
However, you may prefer to show your growth
potential to an ad agency and persuade them
to take a gamble on you. Standard agency fees
include direct and indirect charges. An agency
usually charges by the hour for production work,
which includes creating an advertising style and
producing the artwork and layout.
Before you interview agencies or consultants,
answer these questions:
1. What do you want the agency or consul-

tant to do for you that you cannot do for
yourself ? If your advertising and promo-
tion are not going to include display ad-
vertising in the main part of a newspaper
or magazine, you probably do not need an
agency or consultant.

2. Are you willing to listen to their advice,
or will you do what you want anyway? If
you already have definite ideas about what
you want, you may not need an agency or

3. Is there another way to do it? Perhaps
your graphic designer can handle the pro-
duction of ads and materials. If your ad-
vertising and promotion focus is going to
be on direct mail, classified ads, and pub-
licity, you may really need a marketing or
public relations consultant, a graphic de-
signer, and a media-buying service. (Many
ad agencies use a media buying service to
purchase advertising space and time.)

You should consider an agency if your budget
is large enough to include display advertising
and you have not had any experience in that
field. Display advertising should be profession-
ally written and produced. Writing ad copy is a
combination of art and science, and an amateur
display ad could be worse than no ad at all.
If you decide to hire an agency or consultant,
the process is similar to the one for hiring a
graphic designer:
1. Get the names of firms and people to

interview. The advertising manager of a
local newspaper or other media sources
may be able to give you the names of the
agencies that handle businesses like yours.
Check the names with the local Better
Business Bureau; eliminate those with
complaints on file against them.

2. Contact two or three agencies to arrange
interviews. Tell them how much money
you have to spend. Ask them to show you
samples of work they have done for busi-
nesses similar to yours.

3. Ask for the names and phone numbers of
clients. Check with former clients to see if


they were satisfied. Keep in mind that an
ad is supposed to sell a service or product
— not the ad agency. Creative ads that
win awards do not necessarily increase
sales. Ask about results.

4. Find out who at the agency will be han-
dling your account. Agencies often have
top executives solicit accounts, but the
junior people actually do the work. If you
are not comfortable with the people who
will be working on your account, find an-
other agency.

5. If you plan to do online only advertis-
ing, make sure you work with an agency
or designer who understands the special
requirements and parameters for online
ads and marketing those ads to the most

Find out how the agency or consultant wants to
be paid and what kind of agreement they require.


Creating a
Professional Image
What image do you want to present to your
customers and potential customers? A formal,
organized business image? That is fine unless
you dress casually and informally for business
meetings, or if clients who stop by to pick up a
job find a messy office. The image you project
must match your business style (Figure 3).
There is nothing wrong with being casual and
informal. In fact, many people will become cus-
tomers of your small business because they do
not want to deal with a large, formal operation.
If you start using expensive letterhead and busi-
ness cards and four-color brochures, potential
customers may think you are too big or too fan-
cy for their needs. They may decide you are too
expensive, without even checking your prices.
How can you look good without looking too
good? First, check out other successful small
businesspeople. Ask a few what works for them.
After you have talked to a few small business
owners, you should be able to find your own
style, one that is comfortable for you and works
well for others.

For promotional materials, you need a brochure
or resume that describes your business and ser-
vices. A capabilities brochure can be anything
from a single sheet of paper folded into three
panels to a longer booklet. To start, a brochure
or a resume on one or two letter-size pages
should do the job.
A capabilities brochure or a resume has many
uses. Mail one out whenever you get an inquiry.
Leave one behind when you make a sales or
marketing call. Include one in direct mail pack-
ages. Use one to respond to an ad and follow up
a lead. Offer one free in your advertising.
A capabilities brochure is most effective when it
is typeset and includes graphics. A resume is ac-
ceptable either typeset or typewritten. Generally,
a brochure focuses on your business and a re-
sume focuses on you. You may want to have both
available to attract different types of clients.
A capabilities brochure and a resume should in-
clude the following:

1. An explanation of the benefits of doing
business with you. Sell the benefits of your
services. This is the most important aspect
of a capabilities brochure and a resume.


Figure 3: Your logo can be as simple or as complex as you care to make it. Be sure to make sure your logo represents you,
and what you do, clearly.


2. A description of your services and your
areas of specialization. Include some of
the specific projects you have completed.

3. Important capabilities, such as overnight
and weekend service, free pickup and
delivery, etc.

4. A listing of recent customers — only if
you have received permission to use their

5. A description of your experience and

6. A description of the equipment and
software you use, if applicable.

7. Your name, your business name, address,
email and telephone number.

When you have been in business a while, you
will start getting letters and comments from sat-
isfied customers. You may want to revise your
brochure or resume to add endorsements from
two or three customers who will testify to your
skills, accuracy, quality, dependability, respon-
siveness, and so on.

Your most powerful marketing tool is a customer
who liked the quality and value of your services.
Satisfied customers tell other people about your
business. You probably first learned about many
of the businesses you patronize through recom-
mendations from your friends and family. If so,
you know that referrals can be very effective in
attracting new customers.
People can provide referrals whether or not they
are familiar with the quality of work you do. All
that is necessary is that they know you, the kind
of person you are, and the business you are in.

Make a list of all the people you know in these
• Former coworkers
• Local business owners
• Doctors and dentists
• Bankers or Lawyers
• Neighbors
• Teachers (yours or your children’s)
• Former bosses
• Social club members
• Insurance agents or other professionals

you have done business with
• Former classmates; alumni
• Religious leaders
Send them your brochures, resumes, and busi-
ness cards, along with a friendly letter asking for
their support and referrals. And do not forget to
include the vendors who supply your products
or services on your list. Ask if they can use your
services or know anyone who can. If they have
bulletin boards where business cards are dis-
played, ask them to add your card to the board.


Placing Classified
and Display Ads
There are many methods of advertising. But
because advertising costs money, you should
concentrate on what works and produces a re-
turn. Your market research should identify who
your prospective customers are and where you
can find them. Using that information, you
must then decide which advertising media will
do the best job of reaching those people, at the
lowest cost.
If your target market is mostly in a small town
or the suburb of a very large city, the city’s daily
newspaper is not a cost-effective advertising
buy. You would be paying to send your ad to
people who are miles away, and you probably
would not want to spend the time or money to
service them.
But if the city’s daily newspaper has a zoned
edition that is delivered primarily to your town
or suburb, an ad in that edition might be a good
buy. So might an ad in your town’s weekly or
daily paper. As you might expect, major papers
with big circulations charge more for the same
amount of space than does a weekly community
paper. Also consider advertising in the free pub-
lications distributed at supermarkets, shopping
centers, and door-to-door.
If you want to reach business owners, consider
advertising in the local chamber of commerce’s
newsletter. To reach students and faculty at the
local university, try advertising in the student
newspaper or magazine.
Standard Rate and Data Service is a publication
found in most library reference sections that of-
fers information on most print, radio, and TV
advertising outlets, including circulation, rates,
and coverage. This information is also available
online from university websites but you may

need a school log-on to access this information.
This publication can offer information on me-
dia you already know about, and you may find
new ones worth consideration.
Another guide to ad placement is your compe-
tition. Where do other small businesses adver-
tise? Where do your competitors advertise? If
their choices make sense to you, that is where
your ads should be.
Few small businesses can afford, or need to use,
radio or television, so our focus here is on print
advertising — newspapers, trade magazines, and
directories. But in small communities, radio and
cable TV can be surprisingly inexpensive.
Once you identify where your potential custom-
ers are and how to reach them, it is time to de-
cide what you want your advertising to do. Do
you want to:
1. Make potential customers aware of your


2. Create a favorable impression or develop
your image?

3. Create a need for your services?

4. Sell your services?

5. Remind old customers about your services?

Advertising can do all of these things, but the
most effective ads will focus on doing only
one. The most effective ads are also those that
your potential customers see again and again.
Advertising research shows that most buying
decisions are made subconsciously, and it takes
repetition to reach the subconscious.
Many advertisers waste money by taking an ad
here, an ad there, and a third ad somewhere else,
often in publications that reach far more people
than the targeted market. Their ads are not seen
often enough by their potential customers, so
the ads have little impact. A simple, attractive
ad that people see repeatedly will draw more


Figure 4: Listing your business in a business directory
is a good way to f ind readers looking for your services.

response than an elaborate, expensive ad that
they see infrequently.
Advertising frequently in the same publication
should entitle you to quantity discounts. But
you usually have to ask for discounts, whether
they are quantity or seasonal. Never accept the
first advertising rate you are offered; always ask
for a discount.

Besides deciding which publications will yield
the best results, for both newspapers and maga-
zines, you will need to decide between two types
of ads: classified and display.
Classified Ads. Classified ads work well for
many small businesses. Classified ads can be
particularly effective in trade publications di-
rected at business areas, such as construction,
real estate, or independent business owners,
from which you want to draw customers.
Classified ad space is almost always sold by the
line and limits you to the typefaces and style of
the publication. Many daily newspapers, for ex-
ample, do not accept logos. As a rule, deadlines
for classified ads are much shorter than for dis-
play ads in the same publication.
Classified ads can be an excellent start for your
advertising, as long as you follow some basic rules:
1. Run your ad continuously over a period

of time. That is the best way to keep your
name before your market.

2. Use clear, precise wording in your ads.
Most newspapers have experienced ad
takers who can help you choose the
briefest way to get your message across.

3. Make sure your ad is listed in the right
place. Most newspapers have a “Business
Services” section that works very well
(Figure 4). In trade magazines, you
might also look for other sections where
your ad will fit. Try running your ads
under various sections for two or three
weeks in a newspaper or for a couple of
months in a magazine.

Display Ads. There are two elements to display
ads: copy (what the ad says) and layout (how
the ad looks). Focus your creativity on the copy
and keep the design clean and simple. Creative
copy — particularly a creative headline — in a
clean, uncluttered layout can attract and keep
the attention of the reader. While a creative lay-
out may also attract the readers’ attention, if the
copy is dull and uninspiring, you will lose them.
Layout. If you have the talent or ability to cre-
ate your own ad, you might try following the
examples of other print ads you like. But you
should still try to make your ads look different
from your competitors’. Once you have designed
your ad, keep using it. Over time, readers will
recognize your ads on sight. Incorporate your
logo, if you have one, and try to use a distinc-
tive border to separate your ads from others on
the page. Unless you have a talent for graphic
design and know the specifications needed for
computer graphic art, it is best left to a profes-
sional designer.


Use a large picture or headline as a dominant el-
ement for added visibility. Choose a layout that
carries the reader’s eye through the ad easily and
in proper sequence: from the headline to the il-
lustration to explanatory copy to your business’s
name. Do not crowd your ad. White space is
important, particularly in newspaper ads where
the pages are heavy with small type.
If you rough out your idea for a newspaper ad on
a sheet of paper, the newspaper’s production de-
partment can do the actual layout, maybe even
add an appropriate illustration. Be sure to ask
for a proof of the ad before it runs. This can be
the simplest, least expensive way to get an ad
produced, but there is one drawback. Typically,
newspaper production departments are very
busy, and do not have much time to spend on
your ad, so it will probably look a lot like other
ads in the paper.

You may be selling a service,
but your customer is buying benef its.

Copy. If you retain an advertising agency, it can
write the copy and layout the ad. If you use any
of the other approaches for producing an ad, you
will have to write the copy yourself or hire an
experienced freelance writer to do it.
Make sure your headline promises something or
describes a benef it. You may be selling a service,
but your customers are buying benefits. The first
question a reader asks of an ad is What is in it for
me? Answer that question. Elaborate on the an-
swer in subheads. Headlines starting with “How
to…” encourage readers to read the copy. So do
headlines that give specific information or use-
ful suggestions. Do not generalize in headlines.

Be specif ic in your copy. Do not say you offer fast
service, say how fast: same-day service or next-
day delivery. Do not just say that you offer spe-
cial services, describe those services.
Do not try to impress your readers by exaggerating
or using diff icult words. Everyone understands
simple language, so use it. Avoid full sentences;
use phrases and stand-alone words.
After you have finished a first draft of your ad
copy, look it over very carefully for unneeded
words that rob it of its punch. Get rid of cute
fluff phrases that do not sell your services.
If it is appropriate, use your ad to offer something
— a free copy of your brochure or a 10 percent
discount for a limited time. It will help you find
out how effective your ad is. The calls and let-
ters you get in response to the ad will help you
build a solid list of names and addresses for di-
rect mail selling.

If potential customers read professional or
trade journals, you might consider advertising
in them. The journals allow you to target your
advertising to the most receptive customers.
Another advantage is that, because magazines
often lie around for months, they can produce
results long after they are first issued.
Although advertising in a national journal may
be beyond your means, many fields are served by
local and regional trade magazines. And some
national magazines publish regional editions.
There are thousands of professional and trade
journals. Your local library should have a direc-
tory with names, addresses, phone numbers,


and other information on those of interest to
you. Among the directories you might consid-
er are Standard Rate & Data Service or Gebbie
Press All In One Directory.
Your library may also have copies of some of the
magazines you find listed. If not, you can email
or call the magazine company you are interested
in to get sample copies, advertising rates, and
other information.
Magazines, particularly monthly magazines,
have a much longer lead-time than newspapers.
Ads usually must be submitted two to three
months before publication.
Magazine space for display ads is usually sold
by the page or fraction of a page. Research
shows that effectiveness does not decline di-
rectly in proportion with size; a half-page ad is
about two-thirds as effective as a full-page ad.
Magazines with classified sections sell space by
the line, the same as newspapers.
Magazines usually offer quantity discounts,
based on the amount of space you buy in a
12-month period, and frequency discounts,

based on how many times you advertise in a
12-month period. Make sure to ask about them.
If you try out magazine advertising with clas-
sified ads and have some success with them,
consider moving up to display ads in those
magazines. One advantage of a display ad in a
respected publication is that you can use it in
your promotions. Have reprints made up and
add the line “As advertised in….” They can be
used in direct mail and to answer requests for
information. Mounted on card stock or framed,
they can be used as wall and counter displays.

Ads in directories are effective because they
target people who are interested in the services
being offered. Readers have already decided to
buy; they are just looking for the right business
to buy from. This is particularly true of listings
and ads in the Yellow Pages directory. A good
Yellow Pages listing might not bring in a flood
of customers, but it will bring a slow, steady
stream of business your way.


Anyone with a business telephone is entitled to
a one-line listing in the Yellow Pages directory.
Place your listing under the most obvious head-
ing for your business. Also consider additional
listings under less obvious related headings.
You might also consider buying Yellow Pages
display ads. Whether you do will depend on
how many competitors are listed in your area.
You may need a display ad to help you stand
out. Many businesspeople consider Yellow
Pages display ads the most cost effective adver-
tising available. One commonly used device is a
display ad under the primary heading and one-
line listings under secondary headings that refer
customers to the display ad.
Make sure to place your ad before the closing
date for the upcoming edition. Remember that
Yellow Pages ads run for a full year, so do not
include any information that will be outdated
before the next directory is issued.

One suggestion is that after you become
certified and get your FFL, you can start
out advertising in the gun shops with
business cards.

Offer a free gun cleaning to anyone that
brings you the card. You will get a lot of
folks that come in for cleaning that will
end up needing some other work done
and you will establish contacts and they
will see the quality of your work.

A lot of folks frown at this because you
will be doing a good bit of free work.
Don’t look at it that way. Look at it as an
investment that will get folks to return to
you later on because of the quality work
you provided.




Figure 5: By including a discount or offer in your ad, you can effectively track your direct mail results.

Direct Mail
As you make contacts and keep them on record,
you will be building a mailing list. You can turn
your contacts into cash through direct mail.
Direct mail is any printed promotional material
that is mailed directly to the customer. Direct
mail includes brochures, letters, reply cards,
price lists, catalogs, and coupons.
Direct mail is being used more and more fre-
quently. American business currently spends
more money on direct mail than on radio or
magazine advertising. Direct mail spending
grew 3.1 percent in 2010, and accounted for
$45.2 billion of direct and digital ad spending
in 2010. Direct mail is expected to grow 5.8 per-
cent in 2011, to $47.8 billion. It is one of the
best formats for transmitting detailed informa-
tion. It also offers great flexibility, since you can
send any message to anyone at any time. You
can use direct mail to
• Reach new customers
• Keep in touch with old customers
• Offer special prices or discounts
• Announce new services or capabilities
• Announce price changes
• Develop your business image

Direct mail offers many advantages, which ex-
plains its popularity among advertisers. Among
the many advantages of direct mail are
1. It is highly selective. You can target your

message directly to your potential custom-
ers. You will reach fewer people, but they
will be the right people.

2. It is economical. With a good direct mail
piece, if you target your customers prop-
erly, the cost per sale can be much lower
than any other advertising and promo-
tional method.

3. The results are measurable. You can calcu-
late your cost per sale or per job to evaluate
the true cost, not just the cost per thousand
of doing the mailing. And if you make an
offer with a cutoff date, you know on that
date whether the effort was successful.

Direct mail should not be used as a substitute
for other advertising and promotion. One type
should support the other. Keep in mind that
for a small business, the return from direct mail
may be slow. But there is no other method that
gets your brochure or letter into the hands of so
many potential clients. Plan on sending a series
of mailings, preferably three or more, so that the
services you provide become familiar to prospec-
tive customers.


Most of the techniques for writing effective let-
ters also apply to direct mail letters. The most
important thing to remember when writing a
direct mail letter is to discuss benefits to the
reader and not to sell your service.
Your market is made up of two kinds of peo-
ple — those who have a problem you can solve
and those who have a goal you can help them
achieve. People always want to know what is in
it for them. They also want to know how much,
how fast, how profitably, and how soon. Tell
them. Match the reader’s needs with your capa-
bilities. The best direct mail letters will:
1. Use short sentences and short para-

graphs. Studies show that readers have
trouble with text whose sentences average
more than 17 words. Short paragraphs
(and wide margins) add white space and

2. Eliminate needless words, clichés,
redundancies, and abbreviations. Get rid
of long-winded phrases.

3. Get rid of stuffy language. Be conversa-
tional, not formal. Use contractions and
pronouns. Use one- and two-syllable words
in place of three- and four-syllable words.

4. Use the active voice and strong verbs.
Avoid the various forms of to be: is, are,
and was.

The right mailing list is crucial to successful di-
rect mail. The best list of all is your own custom-
er mailing list, the one you should start compil-
ing the day you open for business. Complement
it with a separate list of potential customers.

Where do you get the names of potential cus-
tomers? You can start with the public library,
which should have lists of local organizations
and professionals. You will have to go through
them and pick out the ones you want. Check
the Yellow Pages for organizations that might
be interested in your services. Check newspaper
announcements of new businesses. Ask current
customers for names.
Your market is made up of two kinds of people
— those who have a problem you can solve and
those who have a goal you can help them achieve.
If your city or county has an economic develop-
ment office, it may have a local business directo-
ry you can buy at a modest price. The Chamber
of Commerce should have a directory of mem-
bers which may be free if you are a member. You
also may be able to buy a one-time use of the
mailing list of another local business.
Mailing list brokers sell names and addresses.
But many of their lists are highly specialized.
Since most customers prefer to find services that
are close by, look for customers within a reason-
able distance from your place of business. Most
lists available from a broker are not that local-
ized and will produce substantial waste, unless
you go through the list and eliminate unwanted
names and addresses.
Wherever you get the names for your mailing
list, qualify them by your own sense of where
your potential customers are. There is a fine line
between direct mail and junk mail. Make sure
you are sending your mailing to people who
want it, people who really might become your
customers. If you use a group mailing program,
such as Val-Pak, you can target your direct mail
by zip codes or regions that are in your area.
To assist you in your design, mailing and send-
ing of your direct mail pieces are companies like
AmazingMail or Vista Print which are one-stop
shops for your direct mail needs.


Keep in mind the rising cost of postage and
consider using a service for your mailing such as or flat-rate shipping from the U.S.
Post Office. Both will save you time and money.
Do your research to find out how to get the best
rate when shipping your direct mail pieces.

There are many different forms of direct mail
marketing. A well-designed postcard can be
very effective. So can packages containing well-
written, personalized letters, brochures, fliers,
coupons, or specialty items, such as pens and
A classic direct mail package consists of an
outer envelope, a letter, a brochure or resume,
a response device (coupon, reply card, or phone
number) and, sometimes, a return envelope. The
important thing is that your direct mail fits the
audience you are trying to reach and project the
image you want for your business.
Outer Envelope. There are three goals in direct

1. To get your envelope opened.
2. To get the material inside read.
3. To get business.

Figure 6: Make recipients curious enough to open the
envelope that has a teaser.

Obviously, you cannot reach the last two goals
if you do not reach the first. One way of get-
ting your envelope opened is to print a teaser on
it that is appropriate for the customers you are
trying to reach. A teaser, as shown in Figure 6,
is a few carefully chosen words that will make
recipients curious enough to open the envelope.
Letter. A good direct mail letter gets the atten-
tion of your prospective customers, generates
interest in your services, offers the reader a ben-
efit, creates a desire for your services, and gives
the reader a deadline for acting. An alternative
approach is a letter that introduces your services
and prepares the reader for your follow-up call
and subsequent meeting, where you will sell
your services.
You might want to make a special offer, such as
a 15 percent discount for new customers who
respond within six weeks. Or you might include
a 15 percent discount coupon for both old and
new customers who submit it with their next job
by a specific deadline. Or you might offer a free,
no obligation consultation.
If you have installed a new piece of equipment or
are using a new technique, write a letter to your
current clients, telling them what this means in
terms of your ability to serve them better. If you
created an unusual piece of work, send it out as
a sample.
Make sure your letter tells a complete story,
even if your direct mail package is to include a
brochure and other materials. Some people will
read your letter; others will read your brochure.
Few will read both.
Brochure and Resume. You may want to include
a capabilities brochure or resume, discussed ear-
lier in this lesson, to project a professional busi-
ness image.
Other Inserts. Many small businesses that use
direct mail include a price list. If you send one out,
be sure to date it so that a prospective customer


who files it away will not insist on holding you
to those prices five years later. Include prices for
each of the services you offer.
Some direct mail advertisers include specialty
items, such as imprinted calendars or pens. If
there is something that current and potential
customers are likely to keep and use, it will help
to keep your name in front of them.

Always check your direct mail efforts to deter-
mine if they are working. Analyze your direct
mail package and its results to see what works
well and what you can improve. Follow up on
each mailing with telephone calls.
Follow-up requires keeping good records. One
way of maintaining good records is to keep cop-
ies of letters you send and make notes on the
copies. You also can set up a log in a computer
database to record the letters you send, the calls
you make, and to schedule and record follow-
ups. Without good records, you will lose track
of important information.
One of the unique advantages of direct mail is
that some aspects of it can be tested inexpen-
sively. In print advertising, only advertisers with
big budgets can afford to try several different
approaches in different media. You can test a
direct mail campaign in several different ways:
1. Try it out on a segment of your mailing list

before sending it to everyone on the list.

2. Send different letters, offering different
limited-time benefits, to segments of your

3. Test the same letter with parts of different
mailing lists.

4. Try different packages (one with a
brochure, one without).

When you test a direct mail campaign, remem-
ber to keep careful records of what went to whom
so that you can evaluate the results and use the
evaluation to plan future direct mail efforts.
One of the best ways to follow up a direct mailing
is making telephone calls. Obviously, if you send
out a direct mailing to a hundred people or more
at a time, following up with phone calls is not
practical. So, some direct mail advertisers send
out their direct mail in segments, or waves. They
time the waves so that they can follow up with
phone calls within two weeks of the mailing.
You will want to sound confident and relaxed
when you call. Here are some suggestions that
will help:
1. Have some notes in front of you about

what you want to cover.

2. Develop an opening statement that will
grab the interest of the person you are
calling. Do not beat around the bush or
the person will lose interest.

3. Record your end of the conversations so
that you can critique your technique.

4. Try writing out a two-minute commercial
about your business to use if you get a
receptive prospective customer on the line.
Rehearse your pitch until you can do it
smoothly and naturally.

5. If the person you call shows interest, do
not use up your entire pitch on the phone.
Press for a personal meeting, 5 or 10 min-
utes long.

6. Be enthusiastic. Smile when you talk, even
on the phone.

Follow up your phone calls and face-to-face
meetings with a letter or thank-you note, par-
ticularly if someone has agreed to send work
your way.


Internet Marketing
There are various companies that can help you
marketing your business on the internet. Many
offer a broad range of services to provide you
with everything that you need, from SEO and
link building, to social media.
If you are having trouble differentiating one in-
ternet marketing service from the next, a mar-
keting company can help you identify what will
be best for your business.
There are many aspects to online marketing.
You may wish to build a website to promote
your business or just use web directories or ad-
vertising to send clients your way. Depending
on what you wish to purchase, you can reach a
very broad audience using the internet for your
The following are some aspects of internet
marketing you may wish to consider for your
Website Analytics: Getting visitors to your
website is the first half of the battle, but turn-
ing them into paying customers is the real key
to success. This will help you pinpoint the most
valuable traffic to your business.
SEO (Search Engine Optimization):
Regardless of offsite factors, such as links and
social media, your website needs to be correctly
set up for search engines to set a strong founda-
tion for the future of a campaign. Coding, de-
sign, and keywords all play an important part
in getting your company’s business in front of
potential customers.

Figure 7: Social media is an inexpensive way to promote
your business.

Social Media: This is an inexpensive way to
get your name out there. Using Facebook,
Instagram, Twitter and other social media can
help increase business (Figure 7). A positive
comment on Twitter from a satisfied customer
can go a long way in stirring up new business.
Video: Creating a video to place on YouTube
or Vimeo isn’t as difficult as you think, and
marketing it the right way can make your busi-
ness seem like an industry expert. Many mar-
keting agencies can help you set this in motion,
including idea creation, development, editing,
posting, optimization and promotion.
Local Search: With more and more people
turning away from the phone book and to on-
line search, local listings are the lifeblood of
many businesses. With this website marketing
service you can build profiles on local sites such
as Yelp and Merchant Circle.




Figure 8: Microsoft Off ice and similar companies
include press release templates in their programs. You
can also download a template off the internet from
Google and a variety of other sites.

Publicity and
Publicity and promotion generally do not cost
as much as advertising, but they do require your
time. If you hire an advertising or public rela-
tions firm or consultant, they can handle public-
ity and promotion for you. At the least, they can
suggest how you should handle it.
Some people regard publicity as free advertis-
ing. You get mentioned in the media because
you or your business is considered newsworthy.
Promotion means engaging in activities that
benefit the media or the community. Ultimately,
this will benefit your business, either by directly

influencing prospective customers or by gener-
ating business through publicity.

A business gets publicity when the news me-
dia feel that providing coverage serves their best
interests and those of their readers, viewers, or
listeners, as suggested by Figure 8. There is no
cost for publicity, but you cannot control it, and
it can be unfavorable. It is as likely to focus on
a problem, such as a lawsuit, as on an accom-
plishment. This gives publicity credibility. The
fact that the media, rather than your paid ad, is
delivering the message makes the message more
Although you cannot control publicity, you can
influence it by providing press releases. Find out
who is responsible for covering businesses like
yours. Let them know of your expertise, and
make yourself available to answer questions.
Good publicity is not easy to come by. If there
are a lot of other people in your area doing what
you are doing, the media may not be interested.
In urban and suburban areas, the competition
for media attention is fierce. In small towns and
rural areas, publicity may be easier to get.
Try to get publicity from the media you already
use for advertising or would use for advertising
if you could afford it. Other good publicity re-
sources are the shopper guides given away free
at supermarkets and shopping centers.

Press releases are a great way to increase news
about your business while reaching a wide on-
line audience. Press releases are sent to a wide
range of media outlets to get wide exposure for
your business.
A well-written press release is the key to good
publicity. When writing a press release, write
clearly and simply. Answer who, what, where,
when, why, and how in the first sentence or the
first paragraph. Press releases vary, but the basic
press release should follow these guidelines:


1. Send releases on your business letter-
head, which should include your address
and phone number. In a block near the
upper right-hand corner, type “Contact:”
and your name and phone number so
that the media can call for more infor-
mation. Include a number where you can
be reached in the evening.

2. Provide information on when the press
release is to be used, about 1 in. below
the contact information and underlined.
Most releases are labeled “For Immediate
Release” or “For Release on Receipt.”
Specify a date or time only when there
is a good reason for holding the news:
“For Release 9:00 a.m., Wednesday, April
15.” When you send a release to only
one publication, indicate that two spaces
below the release date: “Exclusive to the
Daily Press,” and underline it.

3. Include a headline to tell editors and
reporters at a glance what the story is
about. Make it short, no longer than 10
or 12 words, and flush left or centered on
the line.

4. Start the text of the release at least one-
third of the way down from the top of
the page. Leave 1½-2 in. between the
release date and the text. Use side mar-
gins of at least one inch. Double-space
the text to give editors room to edit and
to make it easier for announcers to read.
Indent the start of paragraphs.

5. Do not use “yesterday,” “today,” or “to-
morrow” in a press release unless you
date the press release. You might lead off
the first paragraph with a dateline or put
the date in parentheses immediately after
the first reference to a day: for example,
“a prominent small business owner an-
nounced today (May 3) that….”

6. Keep it short. Two pages are the limit for
most press releases; one page is better. If
your release has a second page, center the
word “MORE” between dashes or in pa-
rentheses at the bottom of the first page.
At the upper left-hand corner of the sec-
ond page, put a “slug line” that identifies
the story followed by a dash and “page
2.” At the end of the release, center sev-
eral pound signs (###) immediately after
the last line of copy.

7. Proofread every press release you send.
Make sure grammar and punctuation are

8. Make sure your originals and copies
show dark, crisp letters on clean white
paper. If your release has more than one
page, make sure copies are collated in or-
der and stapled neatly.

9. Send only one release to each news op-
eration, unless you are told otherwise. If
you do not know who to send it to, call
and ask.

10. Be available to take calls during the day
and evening. Always leave a number
where you can be reached.

Today, television and radio appearances usually
mean talk show appearances. It is easier to get
on local radio and television talk shows, particu-
larly on local cable TV shows, than most people
realize. Local radio, TV, and cable stations are
always looking for new material. But you still
need a strategy that addresses three questions:
1. How will your business benefit the


2. What is in it for the talk show, the broad-
cast station, or the cable channel?


3. How will the listeners or viewers benefit?
Will they learn to do something better,
more effectively, more economically? Will
they be entertained or educated?

Determine which shows in your area are most
likely to be interested in the subject you want to
discuss, which outlets have formats that fit your
message, and which outlets have the audiences
you want to reach. This is particularly important
when the show is focused on narrow segments
of the local market.
Many radio stations have “Tech Talk” formats
on the weekends where an expert from profes-
sional trades comes in to discuss what they do.
This is a great way to promote your business
for free.
Also find out how the host handles guests and
callers. Is he or she knowledgeable about a vari-
ety of subjects? Is he or she polite, or famous for
mauling guests and callers?
This information will help you decide which
shows you want to try to make an appearance on.
Call and ask who books guests for the shows you
are interested in. Develop a letter that describes
the subject you want to discuss. Explain why you
think the subject deserves publicity, and why the
audience will find it interesting. If you do not
hear anything for two or three days after you
send your letter, call. You can stand out from the
crowd simply by following up because so many
people do not bother.
When you get a talk show appearance, do some
practice interviews. Have a friend or associate
ask you questions. Identify three key points you
want to make about the subject or issue. Practice
getting those three points smoothly into the in-
terview. With practice, you will get your points
across whether you get two minutes on the air
or half an hour.

Writing articles has been key to the success of
many small businesses. Naturally, the articles
should have something to do with your busi-
ness. Being a published writer gives you a pro-
fessional edge over your competitors.
There are two ways to get an article published.
You can write or call the editor of the publica-
tion and ask if he or she is interested in the story
you have in mind. Or you can write the article
and submit it with a cover letter. Either way, fol-
low up in a week with a phone call. If the publi-
cation is not interested, you can offer the article
to another one.
Letters to editors of publications can also build
your credibility. Letters to editors deal with sub-
jects that are in the news or are of public inter-
est or concern. Writing a well-informed letter to
the editor shows readers that you have expertise
in the subject area you are writing about.
When you get an article or letter published,
make photocopies to send out as part of a direct
mail package or with your responses to inquiries.

You might consider starting a blog to promote
your business, or to share your thoughts on a
subject that you love? Blogging is either free
or inexpensive, and you can get started in mo-
ments by creating a blog on a site like Blogger
or WordPress.
If you’re going to write about something regu-
larly and keep your blog fresh with new infor-
mation, then you need to write about something
that stokes your passion.
While you want to know your broad subject
area, you need to focus your blog so that it has
a clear purpose (Figure 9). Here are some ideas
for ways that your blog can connect with your
intended audience:


Figure 9: A blog is a great way to discover a new audience and get your business noticed.

• Teach something. If you’re passionate
about a particular subject, and you have
a lot of experience in that area, then you
have a lot to offer both people who are new
to the subject and others who are as experi-
enced as you are.

• Provide the latest news and trends. Write
about the latest developments related to
your topic. You want to be someone who’s
viewed as the ultimate insider so that you
can grow your reader base.

Take a look at other blogs on your topic to see
what other people are already doing. What you
have to offer that is different from what other
people are already doing? Focusing on your spe-
cific area of expertise will give your blog an an-
gle that distinguishes it from your competitors.
Research keywords related to your subject to
help people find your blog. Go to a site like the
Google Adwords Keyword Tool.
Decide where to create and host your blog.
Blogger and WordPress are two of the most
popular blog creation sites on the Web.

Teaching courses in an adult education program
or at a community college or university can lead
to customers and business. Teach a night course
in your area of expertise, since that is when
most adults are likely to be continuing their
Giving a seminar, or helping with one, is an-
other way to increase your contacts. Some small
business owners actually organize seminars to
promote their businesses. But if you do not want
to get involved in the organization and admin-
istration details, contact a local community col-
lege or university. They will do the detail work
and you can give the seminar.

Networking is a promotional technique that has
been around for hundreds of years. Networking
is using one-on-one contacts with other people
to generate new business. The contacts do not


have to be with potential customers; they can be
with people who are in a position to recommend
your services to others. And they can occur at
any time.
Many business owners overlook networking.
But the most successful business owners create
opportunities for networking by taking part
in social and business activities. They join or-
ganizations and mix business with pleasure at
social events.
Groups as diverse as the Chambers of Commerce,
Kiwanis and Rotary clubs, fraternal organiza-
tions, and civic associations can provide you with
excellent networking opportunities. Membership
in these and other professional organizations also
offers chances to promote your business in oth-
er ways. When you attend meetings, have your
business cards ready to hand out. If this sounds
too pushy for you, remember that networking is
not selling. It is meeting people, establishing re-
lationships, and finding out if people are in the
market for your services. Selling comes later.
Through memberships and other networking
opportunities, you will meet people who are
in your field. Establish relationships with your
competitors. Let them know you are available to
handle their work overloads. You will also meet
owners of other, non-competing businesses.
Find out who the good ones are, and offer to
recommend their services if they will recom-
mend yours. Give them your business cards and
brochures and get some of theirs.

Inventive people are continually coming up
with new ways to promote their business.
Specialty promotions include trade shows, pre-
miums and giveaways, joint promotions, tie-in
promotions, contests, displays, and sponsorship
of special events. Whether you should get in-
volved depends on whether the promotions are
appropriate for your business, your customers,
and the cost. Sponsoring a dunking booth at
a neighborhood carnival, for example, probably
would not generate any business and would
not help your business image. But sponsoring
a dunking booth at the chamber of commerce
bazaar to raise funds for the local hospital could
boost your business and give you a lot of chanc-
es to network.

Closely related to specialty promotions is pro
bono and volunteer work. Pro bono is short for
pro bono publico, which is Latin for “to benefit
the public.” By giving your time to benefit the
public good, you not only serve your communi-
ty, you also create an image of a public-spirited
You can donate time or material to a popular
community project, work in the local United
Way campaign, or sponsor the high school foot-
ball team and put your business name on the
back of their uniforms.


Income Records 88
Expense Records 89
Accounting Periods and Methods 89
Other Useful Records 89
Elements Of A Good Records System 89

Bookkeeping Records 91
Other Records 94

Cash Vs. Accrual Systems 95
Reports 97
Setting Up A Bookkeeping Schedule 99
Summary Of Expenses By Account 99
Bank Reconciliation 100
Income Statement 101
Balance Sheet 101
Social Security And Income Tax Reports 101
How Long Should You Keep Records On File? 101

Database Management 103
Spreadsheets 105
Integrated Programs 107

Hire A Bookkeeper Or Keep Your Own Books? 109
How Much Service Do You Need? 109
Some Of The Options 109
Working With An Outside Bookkeeper 110
Other Sources Of Help 110
What To Look For When You Hire A Bookkeeper 110

hapter 4 – B

usiness R
ecords and B




Introduction to
Business Record
Everybody keeps business records, although
they may not realize it. Take, for example, buy-
ing groceries. First you make a list of what you
need. Then you go to the store and find the
items on the list. At the checkout counter you
pay for your groceries and record the informa-
tion onto your checkbook register. Back home,
you may even record the amount you spent in a
budget book.
Although you may not be aware of it, these sim-
ple actions are keeping a type of business record.
You are actually bookkeeping; that is, maintain-
ing a record of certain accounts and transac-
tions. Not only that, the bookkeeping you have


Figure 1: Keeping good records can help you plan for the
future growth of your business.

been doing all your life is the same in practice
and intent — if not in detail — as the book-
keeping you will do for your business.
You should begin keeping business records the
first day you start your business. One reason
to keep business records from the start of your
business is to keep track of money. Business re-
cords also give you information for planning,
preserve the data you need to get tax credit, and
help you meet income tax requirements.
Business records help you chart the course of
your business. Without carefully kept records,
you will not know how your business is doing
today. And if you do not know that, you cannot
plan for tomorrow.
The best way to keep business records is to de-
velop a useful and effective record-keeping sys-
tem that tracks all of your finances. There are
two things your financial record-keeping system
should track: income and expenses, or what comes
in and what goes out. The system you choose
should be simple. Otherwise, you will not de-
velop the habit of using it. It should also be ac-
curate and relevant. Accurate means free from
errors. Relevant means recording only what you
need to record. We will get down to details later
in this lesson, but here’s a quick overview of in-
come and expense records.
Cash vs. Accrual. There are two types of ac-
counting methods: cash and accrual. The cash
method records income when it is actually re-
ceived — when the money is available for your
use. Income is received when it is credited to
your account or when it is set apart in any way
that makes it available to you. You do not need
to have physical possession of the cash. For ex-
ample, dividends or interest credited to your ac-
count by a bank is income, even if you do not
remove it in cash. Using the cash method, you
deduct expenses when they are paid.
The accrual method records all income due and
received and all expenses incurred whether they
are paid or not. Both credit and cash transac-
tions are recorded when made, even if you do
not receive the cash.

If you have a sales and manufacturing business or
a service business that sells products or materials,
the law requires you to use the accrual method.
If you have no inventory, you can choose either
method. Once you choose a method, you cannot
change it, except with approval from the Internal
Revenue Service (IRS). We will discuss account-
ing methods in more detail later in this lesson.

Income records help you keep track of money
that comes into your business. The types of re-
cords you need depend on the kind of income
you collect. If you sell products, you need a Sales
Journal or Cash Receipts Journal. Cash receipts
are amounts you actually receive, either as cash
sales or as checks paid to you by your clients.
If you offer a service or extend credit, you need
an income ledger or an Accounts Receivable
Ledger. Accounts receivable are simply amounts
owed to you for services or goods that you have
sold. For every transaction, record the date, a de-
scription of the transaction, the client’s name,
and the amount received or owed.


Expenses, or disbursements, include all money
that goes out of your business. In general, try to
pay everything with a business check, except for
small items that you can pay for out of a petty
cash fund. Always list the date, check number,
amount, and purpose of each disbursement.
Categorize your expenses so that you will be
ready for the tax season. It’s easy to use a debit
card to make your purchases but be sure to keep
an accurate record of your spending and be sure
to get a receipt for all business related purchases.

When filing your business taxes you must choose
your accounting period. The accounting period
is the fixed period during which you calculate
yearly income. The calendar year is the natural
choice of most business owners, although some
business prefer to use a fiscal calendar, which
sets the date on a specific day/month and goes
through a 12-month cycle, for example June 1,
to May 31. Fiscal years vary between businesses
and countries. The fiscal year may also refer to
the year used for income tax reporting.

There are several other records you should con-
sider keeping, such as records of all tax and loan
payments and all merchandise you purchase for
resale purposes. It is also a good idea to keep
financial statements. Financial statements are
not required by law or for tax purposes, but they
provide a record of basic financial information
that can help your business prosper.
Financial statements are simply summaries of
your financial condition. The two most impor-
tant summaries are the income statement and
the balance sheet. The income statement, some-
times known as a profit and loss (P&L) state-
ment, shows the sources of income, the costs and
expenses, and the profit or loss.

A balance sheet, also known as a statement
of assets and liabilities, is a listing of your as-
sets, liabilities, and net worth at any given time.
Assets are everything your business owns and
include current and long-term assets. Current
assets usually include any asset that will be used
or sold in the normal course of a business year,
such as accounts receivable, inventory, and cash.
Long-term assets are holdings that your busi-
ness intends to keep and use for a year or lon-
ger. They can be financial assets, such as stocks,
bonds, and savings accounts, or capital assets,
such as real estate, equipment, and cars.
Liabilities are amounts that you owe. Short-term
liabilities are any notes and loans due within one
year, unpaid taxes, and tax penalties. Long-term
liabilities are obligations payable in more than
one year. When you compare the difference be-
tween your assets and liabilities, you arrive at the
net worth of, or your equity in, your business.

Common sense will tell you what to put in your
records system. You want to spend most of your
time building your business, not putting down
numbers in rows. So first of all you want your re-
cords system to be simple. You want it to be easy
to set up, easy to keep, and easy to understand.
Your business’s financial health depends on your
ability to keep it organized, up-to-date, and le-
gal. The Small Business Administration says that
“an adequate records system helps increase the
chances of survival and reduces the probability
of early failure.” You need a records system that
is accurate and consistent, one that immediately
gives you the information you need.
You will sometimes need to prove that your re-
cords are correct. A good records system main-
tains a paper trail of invoices and receipts. It
shows what money went where, so that you can
substantiate tax deductions and insurance claims.




Figure 2: A business checkbook can help you keep track of
your expenditures if you keep accurate records.

What Records
Do You Need?
By business records, most people mean book-
keeping records. In this lesson we will look at
bookkeeping as it applies to you. Bookkeeping
basically works the same for all businesses, large
or small. For small businesses, bookkeeping is
simple and straightforward.
You will also need to keep insurance records and
operating records. The particular records you
need to keep depend on the type and volume of
business you do.

Bank Account. One of the first things you need
to do when you go into business is open a busi-
ness bank account. If you pay all of your business
expenses by check (except for petty cash) and
deposit all cash receipts, your check register will
be a valuable record (Figure 2). Check entries
will show the check number, the date, who re-
ceived the check and why, the amount paid, and
the running bank account total. Deposit entries
will show the date, who it was received from,
the amount, and the running bank account total.
Your deposit slips are an important part of your
income paper trail.
To avoid confusion with your personal financ-
es, it is a good idea to use an employer iden-
tification number (EIN) instead of your social
security number for the taxpayer ID required
on your business account. To get your EIN, call
the nearest IRS office and ask for an IRS Form
SS-4, Application for Employer Identification
Number. You can also apply online at https://
jsp. You do not have to employ anyone to qualify
for an EIN. Your EIN should be mailed to you
within two to four weeks.

Income and Expense Ledgers. You will need
ledgers for recording your income and expenses.
A ledger can be a pad with the pages divided
into columns, such as the one shown in Figure
3. You can buy them bound or keep them in a
file folder or loose leaf notebook. They are avail-
able from any office supply store.
Income is every dollar and penny your busi-
ness earns, from fees charged clients, interest on
cash in the bank, and any other earnings. The
key word is earnings. Funds obtained through a
loan, any contributions of funds by yourself or an
investor, insurance recovery for a loss, or similar
funds are not business income. You should make
a note of non-income funds in your income led-
ger and clearly distinguish them from income.
Expenses are incurred by your business for or-
dinary, necessary, and reasonable expenditures.
Ordinary means that such expenses are common
in your kind of business. Necessary, according to
the IRS, means that “they are appropriate and
helpful in developing and maintaining your trade
or business.” Reasonable means any expense that
meets the three conditions mentioned: incurred
by your business, ordinary, and necessary.


Figure 3: Make a note in your income ledger of all income.

Figure 4: You should keep an expense ledger for ordinary, necessary, and reasonable expenses.


Figure 5: Record an account receivable for every invoice or bill you send out.

Figure 6: An accounts payable ledger will help you keep track of money that you have committed to pay.


Some expenses are not considered legitimate
business expenses. One example is money you
take out of your business for your own use,
called a personal draw. Another example is any
mixed business and personal expense. Only the
business part can be entered as an expense. A
sample expense ledger is shown in Figure 4.
Accounts Receivable. Every time you send
out an invoice, or bill, to a customer for pay-
ment, you need to record an account receivable.
The entry should show the date sent, to whom
sent (with account number if applicable), the
service performed, and the payment due date.
The accounts receivable ledger, such as the one
in Figure 5, should also have a running total so
that you can tell at a glance what money you will
have coming in.
Accounts Payable. If you pay all your bills as
they come in, you will have no accounts pay-
able to record. But if you have bills you hold un-
til their due date or until customers’ payments
come in, or if you have many bills to pay, you
need to create an accounts payable ledger, such
as the one shown in Figure 6. An accounts pay-
able ledger will help you keep track of money
that you have committed to pay and that is not
available for spending. The accounts payable
ledger will list when the bill is due; to whom you
owe the money, and how much you owe. This
ledger also includes a block for indicating when
you issued the check.

Petty Cash. For most small businesses, it is a
good idea to set up a petty cash fund to pay for
purchases under $25. To keep a record of petty
cash withdrawals, cash a business check made
out to “petty cash” at your bank. Keep a pad in a
lockbox with the cash and enter each withdraw-
al of cash, with its purpose, on the pad. In ad-
dition, keep a cash receipt or signed petty cash
voucher (these forms are available in most office
supply stores) in the box for each withdrawal.

Insurance. If your business maintains one or
more insurance policies — liability, accident,
health, or casualty (fire or theft) — you should
keep a list showing the insurance company,
policy number, coverage, premium amount, and
premium due date for each policy.
Operating Records. Operating records include
files you must keep, job orders and forms, and
lists of customers and prospective customers.
The operating records you keep depend on
what you do with your business. Follow this rule
of thumb for keeping operating records: If you
think you might need it down the road, keep it.
A standard business journal, available at office
supply stores, comes in handy for marking down
miscellaneous facts and figures (Figure 7).

Figure 7: A standard notebook works f ine to keep track of miscellaneous
expenses but a ‘bookkeeping records’ book is better to keep your records organized.


Setting Up a
This section covers some simple bookkeeping
systems you can set up for your new business.
We will look at the differences between cash and
accrual systems, at setting up simple charts of ac-
counts and ledgers, and at the business reports
you will need to produce for your new business.

Many small service businesses keep cash books
rather than use an accrual system. In business
bookkeeping, cash means checks, checking
accounts, and currency. Keeping cash books
means that you record expenses when you pay
them and that you record income when you re-
ceive payment. Cash accounting is the easiest

Figure 8: Sample shown is standard chart of accounts from a computerized bookkeeping program, you can easily create
your own chart of accounts on ledger paper if you prefer not to use a computerized system for your record keeping.

bookkeeping method for small businesses that
offer services instead of merchandise kept in
Accrual accounting provides a more accurate fi-
nancial picture for firms with a heavy cash flow.
Expenses are entered in the books when they
are incurred, and not necessarily when they are
paid. Income is entered as it is earned, often
even before the customer is billed. If you were
operating a sales or manufacturing business or
were keeping an inventory of merchandise for
resale, IRS rules probably would require you to
use the accrual method.
Since most small businesses use a cash ac-
counting system rather than an accrual system,
this lesson deals with cash accounting. One
caution: Once you adopt a cash accounting
method, you will need IRS approval to change
to the accrual method.
Chart of Accounts. You will need to set up a
chart of accounts, which is simply a list of ac-
count categories. Figure 8 is a sample chart of
accounts. In cash accounting, you use the chart


of accounts to classify expenses and income. You
will set up some accounts (such as automobile
expenses and entertainment) because you will
need to report these expenses separately on your
tax returns. You will set up other accounts (such
as administrative expenses, utilities, or peri-
odicals) so that you can keep track of business
transactions and measure your progress.
The sample chart of accounts shown in Figure
8 probably has more expense categories than
you will need. You can eliminate some catego-
ries and combine or rename others to suit your
particular business.
Keeping Simple Ledgers. With your chart of ac-
counts set up and each account numbered, you
are ready to set up your expense and income
ledgers. You can use a two-column pad, or you
can buy simplified bookkeeping records, with
ledgers already set up, at an office supply store.
If you set up your own expense ledger, write your
business name at the top of a sheet, “expense led-
ger” on the next line, and the month and year on
the next, as shown in Figure 9.

Mark the first column “Date,” and mark the sec-
ond, extra-wide column “Payee & Purpose” and
“Acct. No.” Mark the next column “Check No.,”
and the next “Amount.” Each time you pay a
bill, enter the information in its column. Under
“Acct. No.,” put the expense category number
for each expense.
On your income ledger, write your business
name at the top, “income ledger” on the next
line, and the current period on the third line, as
shown in Figure 10.
Mark the columns “Date,” “Payor” or “Received
From” and “Acct. No.,” “Invoice No.” (you may
prefer not to number your invoices), “Amount,”
and “Year-to-Date (YTD) Total.” As each pay-
ment comes in, enter the information in the ap-
propriate column.
You will have to decide whether to categorize
your receipts by job type or by client. Whichever
method you choose, each account or category
should be assigned its own account number. If
you choose to categorize your income by cus-
tomer, put the customer’s account number in the

Figure 9: If you choose a cash accounting system, set up your expense ledger as shown here.


Figure 10: Set up your income ledger as shown here.

Acct. No. column. If you choose to categorize
your income by job type, put the job-type ac-
count number in the Acct. No. column.

At the beginning of this lesson, we mentioned
why it is important to keep business records: to
keep track of money, to give you information for
planning, to preserve the data you need to get
tax credit, and to meet income tax requirements.
To put the information into a usable form, you
prepare reports based on the ledgers and your
petty cash log. The most important bookkeep-
ing reports you prepare will be the income state-
ment, balance sheet, and summary of expenses
by account.
An income statement, such as the one shown
in Figure 11, summarizes your income and ex-
penses for a given period. The difference be-
tween your income and expenses is called your
before-tax income, before-tax profit, or loss.

A balance sheet, such as the one shown in
Figure 12, lists business’s assets (including
equipment and real estate) and liabilities (out-
standing bills and long-term debts). Assets
are usually listed in the order of liquidity, or
how quickly an asset can be turned into cash.
The difference between assets and liabilities is
owner’s equity, also called capital or net worth.
Both income statements and balance sheets
will be important to bank loan officers or in-
vestors when you apply for credit.
A summary of expenses by account is to show
where you are spending your money. This sum-
mary lets you see where you need to cut back
and where you need to spend more. It also con-
tains information you will need for preparing
your income tax return.
Summary of Expenses by Category. You also
need to summarize your expenses by category
to check against your budget. This comparison
is useful for estimating income taxes, for track-
ing where your money goes, and for planning
your business’s future. In your expense ledger,


Above – Figure 11: An income
statement summarizes your income
and expenses for a given time.

Figure 12: You will ordinarily
prepare a balance sheet every year
and whenever necessary for loan
applications and investor reports.


Figure 13: Keeping accurate record of your time is an important f ile to keep.

you should assign each expenditure an account
number indicating whether the expense is for
administration, advertising, rent, utilities, or
some other category, as shown back in Figure
4. Then, you should regularly add the expendi-
tures for each category and record the totals in
your summary of expenses by account. Details
on how to keep these records are laid out later
in this lesson.

Your bookkeeping schedule will include tasks
you perform continuously, daily, or nearly daily.
There will also be monthly, quarterly, and an-
nual tasks.
One continuous record-keeping task for many
service businesses is time-keeping, as shown
in Figure 13. If you charge for your services
by the hour, you should keep precise time-use
records. Many firms prepare forms for record-
ing staff time in 15-minute increments. Some
small businesses record time less formally on
appointment calendar forms. For all your work,
you should record the date, time of day, task or
service, and customer.

Depending on the volume of your transactions,
you will need to file receipts and pay bills contin-
uously, daily, or at least often enough that they
do not pile up. A receipt filing system can be as
simple as a series of envelopes labeled by month.
If you do not receive many bills, you can pay
them as they come in. If your business has many
credit accounts, you may want to delay paying
bills until they are due. One common method
is to prepare a set of folders, with one folder for
each day of the month, and file bills according
to their due dates.
Another daily, or near daily, chore is to main-
tain your ledgers. Expenses paid out and income
received should be entered at the time of the
transaction. Monthly tasks include summariz-
ing expenditures by account and reconciling your
checking account.

To summarize expenditures by account, pre-
pare a sheet, such as the one in Figure 14, with
columns headed: “Acct. No.,” “Account Name,”
“Amount,” and “Total YTD.” In the “ Acct. No.”


column, list all your expenditure accounts by
number. In the “Account Name” column, list all
the accounts by name. Then, for each account,
add all the expenditures charged to that ac-
count from your expense ledger and from your
petty cash log and enter the total for the month.
Add each account’s monthly total to its year-to-
date total. The sum will be the immediate past
month’s year-to- date total. Enter this number
for each account in the Total YTD column.

Follow these steps to reconcile your checking
account statement:
1. Compare your bank statement to your

check register, and check off each transac-
tion recorded on the bank statement in
the check register.

2. On a pad with columns, enter the final
balance shown on the bank statement.

3. Add to this figure the amounts of all
deposits or other credits shown in your
check register that are not on the bank

4. Subtract the amounts of all checks and
other debits shown in your check register
that are not on the bank statement.

5. Compare the figure with the final balance
shown in your checkbook.

6. If they do not agree, check for overlooked
items and mistakes in arithmetic.

Most banks provide reconciliation worksheets on
bank statements. They also offer assistance when
your records and the bank’s records do not agree.

Figure 14: In your expense ledger, assign each expenditure an account number that indicates its account category and
amount. Then add the expenditures for each account and record the totals in your summary of expenses by account.


Depending upon the volume of your business,
you will prepare an income statement quar-
terly or annually. For a service business with no
merchandise inventory, the income statement
is simple. You simply list all your income and
deduct your expenses. Anything left over, after
subtracting taxes, is net income. You will need
the income statement, along with your balance
sheet, to apply for credit or a loan at a bank or
other lender.

A balance sheet discloses your business net
worth by summarizing your assets (cash on hand,
accounts receivable, investments, and property)
and your liabilities (accounts payable and debts).
The value of your assets minus your liabilities
equals your business’s net worth, or owner’s eq-
uity. Your banker or prospective investors need
to know your net worth to decide whether or
not to loan you money or invest in your business.
Ordinarily you will prepare a balance sheet every
year and whenever you need one for loan appli-
cations or investor reports.
The traditional way to prepare a balance sheet is
to list items on each section of the ledger — the
asset section and the liability section — in order
of liquidity. Thus, under assets, cash goes first,
readily available investments second, long-term
investments third, and personal property and
real property last. Next, list liabilities in order
of immediacy, from most pressing to least. List
bills due tomorrow before credit payments due
next month, which come before loan payments
due every quarter, and so forth.

If you have used property as collateral to bor-
row money, the cash from that loan and the full
value of that property appear on the asset side of
your balance sheet. The outstanding balance of
the loan appears on the liability side.

Most small service businesses operate as sole
proprietorships. This means that you simply
set yourself up as the business. When you work
for someone else, your employer deducts social
security payments and withholds part of your
income to pay federal and state (and some-
times local) income taxes. Now that you are in
business for yourself, you will need to set aside
money to pay your taxes. If you need help, you
can get forms for estimating your income and
self-employment taxes from your local IRS of-
fice. Be sure to note that estimated taxes are due
several times throughout the year. The book-
keeping method described here will provide you
with all the data you need to prepare your an-
nual income tax return.

You should file and keep all your accounting
records and supporting documents (the paper
trail) for at least five years. You will need records
from the last three years if the IRS questions
your returns. You will need records from the last
five years to assess your business development
and to plan its future.




Small businesses usually rely on personal com-
puters to keep their books — either their own
computer or an outside bookkeeper’s. A com-
puter can perform multiple bookkeeping tasks
for the small business, from keeping the general
ledger to tracking inventory. A computer cannot
take over the bookkeeping tasks for you, but it
simplifies the process and makes it easier for the
inexperienced bookkeeper.
If you plan to use a personal computer to keep
the books for your business, there are a num-
ber of bookkeeping software packages on the
market. It is a good idea to choose simplified
bookkeeping and accounting software designed
for service business bookkeeping. Software de-
signed for non-accountants who keep their own
books may be best. Some examples are Quicken
or QuickBooks, both which offer all the com-
ponents you need to keep accurate records. Keep
in mind, just because the software says it can
keep accurate records, YOU must be sure to en-
ter accurate information for the information to
be accurate.

When shopping for a bookkeeping software
package, look for one that uses everyday lan-
guage, rather than accounting jargon. If the
program uses language and terms that you do
not understand, you will not fully benefit from
it. The program’s displays should look like real
bookkeeping forms and documents. For exam-
ple, the check-writing screen should look like
a regular check and the check-register screen
should look like the register you keep manually.
The more familiar the items in the program are
to you, the quicker you can start using that pro-
gram to keep your company’s books.
There are many simplified accounting programs
on the market, and one of these is probably suf-
ficient for your small business. However, for the
more experienced bookkeeper, spreadsheets and
database programs can be useful. These kinds of
programs can be customized to fit your business
needs, but they require a greater knowledge of
accounting procedures.

While the term “database management” sounds
technical, it is really quite simple. Database
management is a fancy term for making lists.
Although the word “database” did not appear in
print until the 1960s, when it first made its way
from the computer room into the dictionary, the
idea has been around a long time. A database is
information organized for rapid retrieval.
Using this definition, can you think of a data-
base you can hold in your hand? What about
the phone book? It organizes information the
same way a computer database organizes infor-
mation. It lists individual entries of telephone
subscribers and gives information related to
each entry: last name, first name, address, and
phone number.

Figure 15: An example of a Quicken window where you
can choose from a Cash or Accrual accounting system.


A computer database is nothing more than a
set of files that stores items of information in
groups. It is the principle of the telephone direc-
tory applied electronically. Of course, a database
can be a lot more complicated than a simple
listing, depending on how much information is
stored and what the user wants to do with the
The telephone directory lists a few items of in-
formation for each entry, and each entry is sort-
ed by last name. Because it is printed media, you
cannot change it or add to it and you cannot use
it if you do not know the last name or business
name of the entry.
A database program, on the other hand, can
take the same information that is listed in a
telephone directory and sort it, list it, and break
it up into big or little groups. Each main entry
could be associated with other items, and each
of those items could have items associated with
it. The program can then be instructed to sort
one, some, or all of the main entries by any of
the associated items. You could, for instance,

sort by the first name “Fred” to search for your
friend’s number. If you knew the town he lived
in or the name of his street, you could sort by
Fred and the town or street to further narrow
the search.
With every electronic database, you can do
certain basic things: enter information (input),
change information (update), look at informa-
tion (query), and print reports (output). At the
telephone company, they input your name, ad-
dress, and phone number in the telephone direc-
tory database when you first get your phone in-
stalled. When you move or change your number,
the phone company updates your entry. Once a
year, they output a new report and drop it on
your doorstep. Although you might not think of
it this way, when you look up the number for a
plumber in the Yellow Pages, you are querying
a database.
In a typical computer database, the program
manipulates information stored in data files.
Each file contains groups of information called
records. And each record contains individual

Figure 16: Sample of a simple database created using Open Off ice.


pieces of information called fields. It works like
the telephone directory: the directory contains
a group for each letter of the alphabet (files).
Each letter group has entries for individual peo-
ple (records). And each entry contains pieces of
information (fields) for each person: name, ad-
dress, and phone number. A simple database can
keep track of who owes the business money and
how much or to simply keep track of your DVD
collection (Figure 16).
Businesses maintain databases to store all kinds
of information. They keep mailing lists of their
customers and creditors. They keep records of
what, where, and when their salespeople sell.
When employees travel for the company, they
keep an expense record so that when they get
back, they can hand in a copy to be recorded in
the sales database. With all this database infor-
mation, the business can analyze performance:
Whom does the company do the most business
with? Which day of the week is the slowest busi-
ness day? What promotional campaign is getting
the most new clients? How much is the business
getting in return for entertainment expenses?
A computer database management program can
help companies answer these questions. By ma-
nipulating information in the database, they can
turn out reports that display information in dif-
ferent ways. Users can then interpret the infor-
mation and decide what it means to the company.
Any organization with more than a few em-
ployees has to keep payroll and personnel re-
cords: hours and pay scale, annual and sick leave,
health benefits, and so forth. Many businesses
use database programs to maintain their inven-
tory records. Bookstores and bakeries, hospitals
and horse farms use computers to keep track of
what is in stock, what has been used, and what
is on order.

Computer spreadsheet programs are the num-
ber crunchers of the software world. They make
tracking money in a business easier and more
efficient. As a result, almost everyone in busi-
ness uses a spreadsheet program of some sort:
every manager, bookkeeper, accountant, person-
nel administrator, small business owner, and
anyone else who must keep tabs on time, money,
or inventory.
In the past, accounting departments prepared
their financial analyses on paper, totaled them by
hand or on an adding machine, had them typed
up, and then handed the results to the boss — a
time-consuming, multi-person task. Today, the
average accounting department is more likely to
prepare a spreadsheet on a personal computer,
print it out, and hand it to the boss — a quick,
one-person task.
Spreadsheets are among the most popular and
widely used business programs. Companies use
spreadsheets to tabulate sales, count inventory
in stock, project staffing needs, track accounts
payable and accounts receivable, maintain the
payroll, and perform many other tasks involving
numbers. A spreadsheet program lets you do on
computer the same things previously done on
paper. A sample spreadsheet screen is shown in
Figure 17.
A spreadsheet works this way: The program
displays a blank grid form full of cells. A cell can
contain a number, label, or formula. The cells
are arranged in columns and rows. Into each cell
you can enter a number to represent a sales fig-
ure, a date, a dollar amount, a number of parts
in inventory, and so on. A cell can also contain
identifying letters and words, called labels. For
instance, you could put labels on the cells across


Figure 17: Sample of a spreadsheet created using Open Off ice.

the top and down the sides, just as if you were
making a table on paper. Finally, the cells can
contain a formula that performs a mathematical
The information you enter on the screen goes
into a data rue, called a worksheet. The work-
sheet can be one or more pages long, depend-
ing on how much information you put in. The
worksheet stores the information and remem-
bers which numbers go in which cells the next
time you use it. The program then sets up the
spreadsheet and the data file fills it in.
Each cell is identified by its row and column. For
example, cell C3 might hold the sales figure for
February; D5, the advertising cost for April; and
so on. If you were entering the data from writ-
ten sales records, you would move around on the
screen from cell to cell, typing in each entry.

After you enter the information, the program
calculates the figures based on the formulas you
have provided. For instance, you might tell the
computer to add quarterly sales figures by stat-
ing that cells M3 = B3 + C3 + D3 and so on.
As you add numbers, change numbers, or move
numbers around, the program recalculates the
totals for you. Like the computer, the spread-
sheet cannot do anything you do not tell it to do.
You have to know what you want it to do, and
you have to enter that as a formula. For instance,
if you want the program to add the numbers in
three cells in the A column, you must tell it that
A4 = Al + A2 + A3.
Of course, a formula can be much more com-
plex than this. Depending on the program’s ca-
pabilities and your expertise, you can set it up
to compute percentages and averages, to divide


sales into categories, or to calculate the returns
from a direct mailing. Once the formulas and
the data are in place, you can tell the computer
to calculate, which it does faster and more ac-
curately than a person can.
The computer quickly adds and subtracts, mul-
tiplies and divides, takes percentages and square
roots, and then prints out a spotless report. All
you have to do is enter the data accurately and
make sure there’s paper in the printer.
Forecasting, Budgeting, and Scheduling. The
same sales figures that described what happened
last month can be used to predict the sales per-
formance for next month, next quarter, or next
year. A spreadsheet program allows you change
variables and apply them to the figures to show
what would happen under different circum-
stances. How would a 10 percent reduction in
travel expenses affect the budget? If you offer a
limited-time discount on a service, how would
it affect your income for the following month?
The spreadsheet functions can be much more
complex than these simple examples indicate.
Similarly, a spreadsheet that maintains a com-
pany’s inventory can be programmed to per-
form involved analyses. Which products sell
best in the summer months? Which products
are chronically overstocked? Which product’s
stock is running low?
A spreadsheet program can compile the data
to answer these questions, and it can give the
answers in different forms for different uses.
Because accountants use numbers all day long,

a spreadsheet table makes perfect sense to them.
But a non-accountant may not have such an
easy time making sense of long columns of fig-
ures. Fortunately, once a worksheet is complete,
a spreadsheet program can convert the data into
charts that communicate the same informa-
tion in a more understandable form. Software
graphics capabilities let the user turn a table of
data into a bar graph, pie chart, or line chart to
make the spreadsheet’s data visually interesting
as well as easier to understand.

A single program that combines the functions
of a spreadsheet, database, and word processor
is called an integrated program. The different
functions in an integrated program can “talk to
each other.” For instance, sales records held in
the database can be transferred to the spread-
sheet for calculation without retyping the in-
formation. Information from the spreadsheet
can then be transferred to the word processor
to print a monthly report. Microsoft Office is
an integrated program but can be costly. If you
don’t have the money in your budget for this
type of program you can use a freeware pro-
gram like Apache OpenOffice, (
which gives you the features of a spreadsheet,
database, word processing program all in one,
without the expense. Fortunately both programs
work seemlessly together.




Working with an
Outside Bookkeeper
When you start your business, you will need
to decide early on whether you want to keep
your own books or hire a bookkeeper. The most
common practice for those starting small is to
keep your own books. Still, that does not apply
to everyone.

It is important to assess your personality, skills,
and business needs realistically. Do you lack the
time, the willingness, and the ability to be the
bookkeeper for your business? Do you expect to
have so much work in your new business that
you will be busy all the time? If so, the practi-
cal solution would be to stick to your specialty
and hire somebody else to keep your books. Do
you always put off balancing your checking ac-
count? Do you often put off little chores, letting
them accumulate until you have one big job of
catch-up on your hands? If your answers are yes
and yes, you should seriously consider hiring a
Many new business owners find they have the
time to keep their own books. When you know
from past experience that you can motivate
yourself to do detailed work and that you are
organized enough to keep up with the books,
you may opt to do most or all of your bookkeep-
ing. Many people get satisfaction from doing
the books. It is like keeping score when you are
winning the game.
If the business is too big for your bookkeeping
ability or if it outgrows your ability, then the de-
cision becomes easy — get outside help.

A small business, starting slowly, may not re-
quire any more expertise than what you learn
in this lesson. But if the material discussed
here sounds too intimidating, you might want
to hire an accountant or bookkeeper to set up
your bookkeeping system.
Report preparation is another job for which
many business owners hire bookkeepers. Often,
business owners maintain their own ledgers and
other continuous accounts but leave the number
crunching and report preparation, including tax
returns, to professionals.
Still others opt for full bookkeeping services.
The point is that your choices are not limited to
getting professional help or not getting any help
at all. You can get as little or as much profes-
sional bookkeeping help as you need. The best
bet is to discuss your needs with a bookkeeper
and then decide how much bookkeeping you
will be comfortable doing yourself. If you decide
to get outside help in setting up your bookkeep-
ing system or in keeping all of your books, here
are some tips for hiring a bookkeeper.

It is not necessary to take on all of the work
when you decide to be your business head book-
keeper. That is just one of the options. Other
options include:
1. Hiring an accountant or bookkeeper to set

up your bookkeeping system, then main-
taining the books yourself.

2. Hiring a bookkeeper to prepare only your
monthly summaries and financial reports.

3. Retaining an accountant or tax adviser to
prepare your state and federal income tax
returns. You can do this in combination
with one of the other two options.


The best credential for an accountant is the
title CPA. CPA stands for Certif ied Public
Accountant, a title granted only to people who
have completed the required college training,
worked for an accounting firm (or otherwise
gained experience in the field), and passed a
certification exam. The CPA title ensures that
the accountant has reached a certain level of
Accountants who are not certified are called
Public Accountants and may or may not be li-
censed by the state. This does not mean they are
incompetent. They may be as skilled as CPAs.
Ask for references to be sure you will be satisfied
with the work the CPA or PA will provide.

There are other types of professional help for
small businesses. Small-business consultants are
neither accountants nor bookkeepers but have
expertise in running small businesses. They may
be professors at your local college who special-
ize in small businesses or they may simply be
people with extensive business experience.
Your local Chamber of Commerce is a good
source for small-business information. So is
the Small Business Administration. Many local
chambers sponsor small business seminars on
the topics discussed in this lesson.

Choosing professional help for your business is
like choosing a doctor or dentist. You start by
asking around and getting recommendations.
Ask your friends and business associates. Get
recommendations from other professionals,
such as your insurance agent or banker. Talk to
referral services run by state and local profes-
sional associations. Avoid picking names out of

the Yellow Pages. You have no idea what kind of
product you may be buying.
Here are some important things to consider
when you hire an accountant or bookkeeper:

Reputation and Existing Client Base.
Obviously, anyone you choose should
have a good reputation among profes-
sionals and clients. If someone is rec-
ommended to you, ask for a list of his
or her clients and then find out if past
clients were happy with the work.
Experience and Skill in Your Area.
Small businesses have special book-
keeping needs. Just because your un-
cle’s accountant is great in big business
does not mean he knows much about
running a small business. Many CPAs
specialize and work only with large
corporations. Sit down and discuss any
prospective accountant’s experience
with small businesses.
Time and Interest. A professional
bookkeeper or accountant should be
willing to take some time to get to
know your business, your problems,
and your future goals. If he or she does
not seem interested or just wants to
process your work through the firm,
find someone else. Of course, a good
bookkeeper is in demand and is often
expensive, so do not expect hours of
conversation. In fact, be suspicious if
he or she has “all the time in the world”
for you. It may mean he or she does
not have many other clients.
Reasonable Fees. Reasonable means
neither exorbitant nor suspiciously
cheap. Too high may be a drain on
your finances but too low might not
buy the service you need. A profession-
al bookkeeper or accountant will dis-
cuss fees willingly. Accountants usually
bill by the hour. Specialized services,




• There are no right or wrong answers
to this quiz. These questions should
help you assess your potential
success as your own bookkeeper.

• Do you usually keep effective, up-to-
date personal records?

• In your new business, do you expect
to have spare time between jobs?

• As you study this lesson on business
record keeping, do you feel
comfortable with the material?

• Do you like the idea of working with
your books and keeping tabs on your
business’ progress?

• Do you see value in organizing your
business and financial information for
planning and budgeting purposes?

If most of your answers are yes, you are
a strong candidate for handling your own

bookkeeping and business records.

such as tax preparation, sometimes in-
volve fixed estimates.
Philosophy and Style. Remember, you
are dealing with a human being, not a
computer program. So choose a book-
keeper or an accountant you think you
can get along with and who shares
your business philosophy.

Make a list of the qualities you are looking for,
such as competence, good reputation, and com-
patible personality. Interview several bookkeep-
ers whose backgrounds suggest they would be
suitable. Then, trust your feelings and choose
the one you think you can work best with.
Be open with your bookkeeper or accountant.
Give him or her access to all your business in-
formation and tell him or her every relevant fact
about your business. If you form a good pro-
fessional relationship with your bookkeeper or
accountant, you can count on reliable financial
advice to help you chart the course of your ex-
panding business in the years to come.



Know What You Are Pricing 118
Pricing Guides 118
Condition 119
Nra Modern Gun Condition Standards 119

Education In A Day 123
Taking Notes 124
Public Auctions 124
Auctioneers 125

Getting Started 127
Do Your Homework 128
Firearm Appraisers 129

hapter 5

– A
ppraising Firearm




Modern collectible firearms is the fastest-grow-
ing sector of firearms collecting. Not long ago,
collectors concentrated only on antiques and
very expensive firearms, limiting ownership of
such collections to wealthy people. These days,
collectible firearms are not cheap, but the prices
are now within the means of thousands of peo-
ple, rather than just a few.
Condition, rarity, demand, special features, and
historical significance all determine a firearm’s
value. The value is always considered in rela-
tion to the condition of other examples of the
same make, model, and variation. The condition
is determined by the amount of original finish
remaining on all parts of the firearm, as well as
the condition of the wood.

Colt 1851 Revolver


The gunsmith and gun dealer must know how
to evaluate modern firearms as well as collect-
ible ones. Modern firearms are those that are
currently used by hunters, target shooters, etc.
Once you are able to evaluate most firearm
models accurately, further opportunities await
you. Attorneys may ask you to appraise fire-
arms for estates. Or insurance companies may
ask your assistance in appraising firearms to be
insured or for a claim against fire or theft. Many
firearm appraisers charge a minimum of $200
per collection. In most cases, the appraisal can
be made in less than an hour. When large col-
lections are involved, or if much research has to
be done, the job could take a week or more to
complete. In such cases, $1,500 – $2,000 is not
too much to charge. Online appraisers are avail-
able for a fraction of the cost but they base their
appraisal on a photograph, not seeing or holding
the actual firearm. While there are many repu-
table firearm appraisers online, you will need to
do some research to find one whose appraisal
rating is high. Once you know how to appraise
firearms, you will also be in a better position to
buy and sell used guns in your own shop, or to
give a fair trade-in on guns that your custom-
ers want to trade for new ones. Consequently,
this lesson is designed to acquaint you with the
techniques involved in appraising firearms of all
types — from antique to modern.


Figure 1: Gun Trader’s Guide is one of the better pricing
and identif ication guides for f irearms manufactured
after 1900.

Gun Values
A firearm’s true value is not simply what the
owner thinks his or her gun is worth. Nor is
it the price the seller asks or the amount the
buyer is willing to pay. The true value is deter-
mined when the amount the seller will accept
coincides with the amount the buyer is willing
to pay. This, and only this, is the true value of
any gun.
Demand for collector firearms is constantly in-
creasing, and any gun’s worth rises in propor-
tion to the demand for it. Many working guns
are also rising in value. Working guns are guns
that are used for hunting and target work, not
decorative guns to be hung on the wall and
never used.
Demand is also influenced by newspaper and
magazine articles and by books that describe
and classify specific firearms. Some movies
have also influenced demand. For example, be-
fore the movie Winchester 73 appeared in the
1950s, few people knew that the “One of One
Thousand” Winchester existed. However, after
the movie, over 100 of these models turned up,
each demanding a price of over $1,500. Today,
the same rifle will bring $50,000+ or more if it
is in good condition.
Gun values also vary from region to region and
from dealer to dealer.
Even with the National Rifle Association
(NRA) Standards of Condition as a guide, it is
difficult to appraise or evaluate the general con-
dition and mechanical features of any firearm
accurately unless you can examine it person-
ally. Identifications or appraisals by mail or on-
line can be inaccurate and unfair to the owner
and the gunsmith who is being asked to iden-
tify or evaluate the gun unseen. If the owner is

unfamiliar with firearms, he or she probably will
not know if parts have been replaced or altered,
or if the gun has been refinished, made up from
two or three specimens, or is a rare variation
or a transitional type. In correspondence, such
points may be overlooked. If you are asked to
identify or appraise a gun by mail or online, the
most you can do is offer a probable value of the
model or type.
Keep in mind that collector values of antique
guns tend to rise steeply when the gun falls in
the “Fine” or “Excellent” category. This is par-
ticularly true of older firearms, which are rarely
encountered in top condition. The rarest guns are
almost always in worn condition, but this does
not severely lessen their value. However, if you
find a rare firearm in excellent to mint condition,
you could probably retire on the profits from that
sale alone! It would be worth at least 10 times
the value of the same firearm in worn condition.


Knowing what you are looking for and what
you have found is one of the first requirements
of the serious gun collector, and there is no
better way to learn about guns than through
the many reference books and cata-
logs available on the market. For exam-
ple, consider the famous Colt Model 1911
semi-automatic pistol. During World War
I and II, Colt licensed other firms to make
these pistols under government contract. These
firms included Ithaca Gun Company; North
American Arms Company, Ltd.; Remington
Rand Company; Remington-UMC; Singer
Manufacturing Company; Union Switch &
Signal Company; and Springfield Armory.
Because of these different manufacturers, Colt
Government Model pistols vary in value from
about $4,000 for a U.S. Model 1911 in excellent
condition (manufactured by Colt) to more than
$14,000 for the same model manufactured by
North American Arms Company, Ltd. — with
many other prices for the models in between.
Then there are variations of this model, includ-
ing the Colt Service Model Ace Automatic
Pistol (chambered for .22 Long Rifle), Colt
Gold Cup National Match, .45 Auto, and the
commemoratives, just to name a few. Unless you
happen to be a Colt collector, curator, or dealer
who is constantly keeping up with the demand
and prices of Colt handguns, you will have to
seek the advice of others to find the current
market value of all these weapons.

Many pricing guides available include Gun
Trader’s Guide by Skyhorse Publishing; Antique
Firearms: The Collector’s Guide, which was last
printed in 1994 by Stoeger Publishing Co., and
Blue Book of Gun Values, by S. P. Fjestad. All these
books are available for purchase from online re-
tailers or you may find a copy in your library.

Figure 2: Flayderman’s Guide to Antique American
Firearms and Their Values lists f irearms manufactured
prior to 1900.

For firearm identification and pricing of firearms
manufactured after 1900, Gun Trader’s Guide,
shown in Figure 1, is the best of the three since
it contains complete specifications and photos of
most models of firearms made in the twentieth
century. This firearm pricing guide is updated
every two or three years. For firearms originally
manufactured before 1900, Flayderman’s Guide
to Antique American Firearms and Their Values,
shown in Figure 2 is a good source for antique
firearm values to replace the out of print Antique
Firearms book. For simply pricing guns, the Blue
Book of Gun Values, shown in Figure 3, is the
best. It is updated annually, and contains prices
of each model of both antique and modern guns
in several conditions. However, it contains very
few specifications and no photos.
Anyone who buys, sells, trades, appraises, or re-
pairs guns should have all three of these books
or similar publications. If you cannot find them
at your local bookstore or sporting goods store,
you can purchase online from various retailers.


Figure 3: Blue Book of Gun Values lists both modern and
antique f irearms and is updated on an annual basis.

When using any of these pricing guides, remem-
ber that they are “guides,” not “gospel.” A par-
ticular arm may have doubled in price since the
latest edition was printed, causing you to sell or
buy a particular gun at more or less than the gun
is worth. Any printed price guide or reference
book, especially in this period of rampant infla-
tion, can be used only as a guide. Consult other
sources before finalizing a deal on any firearm if
you are not sure how the market is doing.

The condition of a firearm is a big factor in de-
termining its value. In some rare collector mod-
els, a jump from one condition to another can
mean a value difference of several thousand dol-
lars. Therefore, it stands to reason that you must
be able to determine condition before you can
evaluate firearms accurately. Several sets of stan-
dards have been available over the years, with the
NRA Modern Gun Condition Standards prob-
ably the most popular. However, in recent years,
condition has been specified by the percentage of
original finish remaining on the firearm — both
on the wood and on the metal. Let us see how
these various standards compare.

• New: Not previously sold at retail, in same

condition as current factory production.

• New, Discontinued: Same as New, but
discontinued model.

• Perfect: In new condition in every respect;
sometimes referred to as mint.

• Excellent: New condition, used very little,
no noticeable marring of wood or metal,
bluing perfect (except at muzzle or sharp

• Very Good: In perfect working condition,
no appreciable wear on working surfaces,
no corrosion or pitting, only minor surface
dents or scratches.

• Good: In safe working condition, minor
wear on working surfaces, no broken parts,
no corrosion or pitting that will interfere
with proper functioning.

• Fair: In safe working condition, but well
worn, perhaps requiring replacement of
minor parts or adjustments that should
be indicated in advertisement; no rust but
may have corrosion pits that do not render
the gun unsafe or inoperable.

• Poor: Badly worn, rusty, and battered,
perhaps requiring major adjustment or
repairs to place in operating condition.

The NRA also makes available Antique Firearm
Condition Standards. They are largely based on
percentage of original finish, as follows:
• Factory New: All original parts; 100 per-

cent original finish; in perfect condition in
every respect, inside and out.

• Excellent: All original parts; more than
80 percent original finish; sharp lettering,


numerals, and design on metal and wood;
unmarred wood; fine bore.

• Fine: All original parts; more than 30
percent original finish; sharp lettering,
numerals, and design on metal and wood;
minor marks in wood; good bore.

• Very Good: All original parts; none to
30 percent original finish; original metal
surfaces smooth with all edges sharp; clear
lettering; numerals, and design on metal;
wood slightly scratched or bruised; bore
disregarded for collector firearms.

• Good: Some minor replacement parts;
metal smoothly rusted or lightly pitted
in places, cleaned, or refinished; princi-
pal lettering, numerals, and design on
metal legible; wood refinished, scratched,
bruised, or minor cracks repaired; in good
working order.

• Fair: Some major parts replaced; minor
replacement parts may be required; metal
rusted, may be lightly pitted all over,
vigorously cleaned, or reblued; rounded
edges of metal and wood; principal letter-
ing, numerals, and design on metal partly
obliterated; wood scratched, bruised,
cracked, or repaired where broken; in fair
working order or can be easily repaired
and placed in working order.

• Poor: Major and minor parts replaced;
major replacement parts required and ex-
tensive restoration needed; metal deeply
pitted; principal lettering, numerals, and
design obliterated; wood badly scratched,
bruised, cracked, or broken; mechanically
inoperative; generally undesirable as a col-
lector firearm.

These NRA standards were compiled a num-
ber of years ago, and current dealers have found
a need to offer a more accurate description of

antique firearms. For example, these days, an
antique arm considered in “Excellent” condi-
tion may have 95 percent original finish (not
just the “over 80 percent” as prescribed by the
NRA Standards). That 15 percent difference
between 80 percent and 95 percent could make
the difference between a selling price of $500
versus $5,000 or more for some models. So you
will find that most successful antique gun deal-
ers today try to break down that percentage of
original finish even more.
An example of a pricing guide broken down in
several percentages of original finish is shown in
Figure 4. This is how the Blue Book of Gun Values
lists most of its firearms. There is also excellent
reference material in this book that will teach
you how to define the percentage of original
finish on any firearm more accurately
While pricing guides provide a fairly accurate
yardstick for determining the value of used
guns, you can also look at online periodicals and
websites as well. Anyone who does much trad-
ing should keep these publications on hand at
all times and study them thoroughly. Also, look
for several examples of the same model gun.
The asking price by one gun owner might be
much different than the average.
You will also want to visit gun shops, trade
shows, antique gun shows, and auctions, all
of which are held weekly in some parts of the
country. The shooting publications or websites
just mentioned usually list dates and locations
of these shows. Talk to the experienced traders.
Here you will see guns actually being bought
and sold, not just what the asking prices are. If
you see a certain gun priced at $500, and you
see several of the same model selling for around
this price, then you can be sure that this is the
true current value of that particular gun. You
will also have a chance to see if the theoretical
published prices conform to the actual buy-and-
sell figures.


Figure 4: Sample page from the Blue Book of Gun Values shows a model listed in regards to the percentage of remaining
original f inish.


Some firearms are rarely listed in the pricing
guides. Included in this group are custom-built
sporting rifles based on military barreled ac-
tions, factory rifles converted to wildcat calibers,
and certain handmade weapons. Determining
the value of a custom-built rifle can be difficult,
even impossible, if you do not know what you
are doing. One reason is that they vary widely in
workmanship and value. Another reason is that
a custom-built rifle is just that — one built for a
certain individual, to his or her exact specifica-
tions. The original rifle may have cost the owner
$10,000 when it was first built by a custom gun-
smith. However, when the owner tries to sell the
rifle, a new problem arises. Since the rifle was
not custom-built to the new owner’s specifica-
tions, it can be difficult to get even half of the
original cost. So be cautious when dealing with
custom-built rifles or shotguns. This certainly
does not discredit the gunmaker, but since cus-
tom guns are built on an individual basis, they
are not the best “used gun” value for the average
gun dealer or gunsmith (Figure 5).

Figure 5: Custom-built rifles may cost the original purchaser thousands of dollars. However, used custom rifles are diff icult
to sell, and most gun dealers stay away from rifles of this type.


Gun Shows
Education is a combination of learning and do-
ing. You can know all there is to know about a
subject, but if you do not apply this knowledge,
it will not do you much good. You cannot really
get a feel for a topic until you get some hands-
on experience.
The same is true about appraising firearms.
You can study all the published pricing guides,
read the various shooting publications such as
Shotgun News, American Rifleman and others,
but until you actually get into the practice of
appraising firearms accurately, your knowledge
of the subject is still questionable. For a list of
shooting publications visit www.nrapublica-
There are dozens (if not hundreds) of gun shows
held around the country almost every weekend
of the year. Look in the back pages of gun pub-
lications for a complete listing and dates of the
more popular gun shows or search for a web-
site that lists gun shows in your area (Figure
6). Chances are, you will see one or more such
shows that will be held in the future near your
home. If at all possible, try to attend as many of
these shows as you can.

Figure 6: Various shooting publications list gun shows in their magazines and online. You can usually f ind smaller gun
shows in your area several times a month, and large shows a few times each year.

If you have never attended a gun show, your first
one will give you an education in gun trading
that you can never experience from books alone.
The types of gun shows that you want to attend
at this point are the ones that deal mainly in
used guns. However, there are others also wor-
thy of your attention.
The NRA holds its annual convention in the
spring of each year — usually in a midwestern
state. The NRA convention will have booths
occupied mainly by manufacturers of new guns,
reloading equipment, gunsmithing supplies, etc.
While interesting and worthy of your time, this
is not the show to attend to learn about gun
trading. Rather, you will want to locate a gun
show with mainly used guns and related prod-
ucts displayed.
When you arrive, you usually have to pay a fee
— anywhere from $5 to $15 per person. When
reviewing the shows available, always look at the
number of tables or booths available. The larger
shows will have 300-500 tables of used guns and
related equipment. This is the type of show you
want to look for.
Once you are inside the building, take a quick
walk around the entire area, glancing at each
table as you pass and making mental notes of


what you see. When you have made your first
round, which might take an hour or more, look
for tables with the most people standing around.
Chances are, some trading is going on. Here is
where you want to be “a mouse in the corner.”
All you want to do at this point is observe.
With the knowledge that you have already
gained from the Sonoran Desert Institute’s
Gunsmithing course, you should be able to tell
the most knowledgeable displayers quickly. But
each will have a different selling technique.
You will see many guns that you recognize, but
you will also see many oddities that you do not
recognize. This is where a notepad comes in
handy. Take notes on anything of interest or use
your phone or camera to snap a quick photo of
an interesting firearm.
While you should observe the price tags on the
various weapons to see how they stack up with
what you have learned from pricing guides and
shooting publications, the thing you want to
pay the most attention to is the cash or check
that exchanges hands on a particular gun sale. A
gun may not always be worth the asking price.
It is what the buyer is willing to pay that counts
the most.
Yes, a gun show can give you an education in a
day, so be sure to make a day of it. Unless it is
an extremely small show, you can easily spend a
whole day there. The displays and the trading
that go on will give you some experience, and
experience is what you need before you can con-
sider yourself a professional.

Someone once said, “The weakest ink is better
than the strongest mind.” This means that any-
thing in writing is more permanent than our
memories. Consequently, when you attend gun
shows to obtain pricing information, always carry
a notepad and pen. When you see an actual sale
of a firearm, write down the manufacturer, mod-
el, condition, price, and other pertinent informa-
tion. This information will prove invaluable in

the future when it becomes your turn to deal in
firearms and/or appraise guns for clients.
Most dealers who regularly attend gun shows
log an enormous amount of mileage on these
trips. While the airlines account for most of this
mileage, trains, autos, and buses also transport
thousands of dealers, gunsmiths, and firearms
enthusiasts each year.
When you see a new model of firearm and its
asking or selling price, make a note of the infor-
mation. A camera is also helpful when attending
gun shows to record various new models of fire-
arms. You can easily record information or make
notes on your phone or tablet if you carry one.
If you come across a firearm that you do not rec-
ognize, ask the owner or the person selling it to
identify it. In most cases, he or she will know
what the firearm is. Occasionally, the seller is
wrong, so be sure to verify everything that you
are not sure of. Make notes of the gun’s char-
acteristics, including all markings. When you
return home or to your gun shop, use your ref-
erences to verify the information. Also check
the selling price with your pricing guides. How
close were the two prices?
After you have been to a few gun shows and tak-
en notes of prices on new models of guns as you
come across them, you should be well on your
way to becoming a good firearm appraiser. But
do not expect to become an expert overnight.
It takes many months of studying and actually
buying and selling guns before this will happen.

Public auctions are another excellent means to
compare prices of both modern and antique
firearms. You probably will not locate as many
of these as you will gun shows, and you will not
find a lot of guns (if any) at every public auction,
but you still want to keep your eyes open for list-
ings in local newspapers.
When an auctioneer advertises or announces an
auction sale, many of the most attractive items


are listed in the ad. If firearms will be sold, these
will probably be among the list. Look in the
classified section under “ Auctions,” and when
you find one that interests you, make a phone
call to the auctioneer and ask if there will be any
firearms sold. You might also want to look in
the Yellow Pages or online. Contact the various
auction houses and let them know that you are
in the firearms business and would appreciate
being informed of any future auctions that will
have firearms for sale.
When attending an auction, you will again want
your notepad to record the various models sold,
their condition, and most important, the price
obtained for each. Once you have accumulated a
list of this type, it will become your best source
for pricing firearms.
There are many reasons for auctions. Some be-
lieve this is the best way to dispose of property
quickly, and they are probably right. Sometimes,
auctions are held to settle estates. Many such
auctions have excellent gun collections that the
heirs do not want. In other cases, a firm might
be going out of business, and everything needs
to be sold.

Some auctioneers specialize in firearms. If such
an auctioneer is holding an auction near you,
you definitely should attend. Some such auc-
tions have been known to run into the mil-
lions with firearms being sold like a “One of
One Thousand” Winchester Model 1873 for
$45,000, a Parker AA1 Special double-barrel
shotgun for $95,000, or a Colt Army single-
action revolver with serial number “1” bringing
almost a half million dollars!
The following are the names and addresses of
some auctioneers who specialize in firearms and
related items. You might want to contact each
of them and ask them to put your name on their
mailing list.

Bonhams Auctioneers & Appraisers
220 San Bruno Avenue
San Francisco, CA 94103
(415) 861-7500

Fagan Arms Inc.
33915 Harper Avenue
Clinton Township. MI 48035
(586) 465-4637

Rock Island Auction Company
7819 42nd Street West
Rock Island, IL 61201
(800) 238-8022

1334 York Ave.
New York, NY 10021
(212) 606-7000




Figure 7: A f ine shotgun with much engraving is a great f ind for most gun collectors.
Damascus barrels, however, bring less than their steel-barrel counterparts.

Your Own
Appraising Business
There are few people in the United States who
make a living solely by appraising firearms.
However, there are hundreds who earn extra
money by appraising firearms for attorneys who
handle estate settlements, fire and theft losses
for insurance companies, and those who want
to know the value of their firearms to obtain the
right amount of insurance on them. Perhaps a
widow has her late husband’s firearms and wants
to get rid of them. She wants to get a fair price,
so she has the guns appraised by an experienced
firearm appraiser. She may then advertise the
guns, sell them at public auction, or let a gun
dealer take them to sell for her on consignment.
There are also appraisers who are experts at gun
pricing but appraise guns only to find highly
sought collector firearms for themselves, or

perhaps to obtain them at a good price and later
sell them for a higher price.
Regardless of the reason, appraising firearms
can bring additional income to your gunsmith-
ing business. It is also one way to see and handle
the finest firearms made, especially if you build a
reputation for accuracy in your appraisals.

The material previously covered in this lesson
should lay the groundwork for you to get started,
as long as you follow the suggestions given; that
is, obtain reference books, price guides, attend
gun shows and public auctions, etc. To become
an expert appraiser, you must first be able to rec-
ognize practically all firearms. Furthermore, in
the more desirable pieces, you must be able to
detect fakes and those that have been refinished.
Some gunsmiths are able to duplicate an origi-
nal finish on some high-priced collector pieces
that even fool the experts at first glance, but if
you look long enough there is always some tell-
tale sign that give the job away.


When you come across rare firearms (Figure 7),
keep a list of experts whom you may consult to
confirm a particular model. Museum curators
are one good source; reference books are another.
Once you feel like you are good at identifying
firearms, grading their condition, and putting a
fair retail price on them, you are ready for the
next step.

There is a salesman on television who sells
books and audio tapes on how to get rich. His
favorite statement is, “Observe what the poor
people do and then do just the opposite.” A bet-
ter procedure for firearm appraisers is to study
the techniques of successful appraisers carefully
and then decide which of these techniques are
best for you.
These appraisers’ techniques include their
means of advertising, the amount they charge
for appraising firearms, etc. For example, Turner
Kirkland of Dixie Gun Works (www.dixiegun- bought, sold, and traded antique
guns since 1932. Dixie bought, sold, and traded
over 1,000 guns per year. Kirkland often attend-
ed 25-30 gun shows each year, at which time
he examined and viewed thousands of antique
firearms. Since his expertise was in the field of
antique firearms or collectors’ firearms, in special
cases of unusually rare antique firearms or those
that may be historically oriented, he may have
needed to consult outside contacts. In appraising

modern guns, which he did not study, he may
also have needed to turn to outside contacts.
Kirkland’s fee was approximately $50 per hour
or any fraction thereof while working. This cal-
culated time also included the time his secre-
tary spent writing and mailing his documents.
If Kirkland left the office, he charged about $75
per hour with a travel fee of about 50 cents per
mile, plus necessary telephone calls and over-
night accommodations.
The appraisal document prepared by Dixie Gun
Works was so complete that it would be good for
any legal debate in court or within the offices of
an insurance firm. Dixie’s appraisers understood
how to describe antique firearms and their ac-
cessories, and how to put this wording into lan-
guage that the average person understood.
Kirkland’s evaluation was at the retail level,
which meant that he would evaluate an item at
what he knew its average retail value to be. He
would not purposely appraise a gun higher than
its real value in the case of an insurance claim.
This is how one successful firearm appraiser
operated. This information should be helpful to
get you started in investigating the techniques
of other successful appraisers.
The following is a list of some of the best fire-
arm appraisers in the country. Make a note of
the following list if you plan to get into the busi-
ness. Many appraisers have brochures that give
their fees, travel expenses, etc. Use these figures
as a guide to establish your own fees.


Please note that this list is current at time of print-
ing, although information changes regularly. SDI
does not guarantee the services of any appraisers
listed below.


Ahlman’s Gun Parts & Services
9525 230th St. W.
Morristown, MN 55052
(507) 685-4244

The Armoury, Inc
233 Litchfield Turnpike
New Preston Marble Dale, CT 06777

David Condon, Inc.
P.O. Box 7
109 E. Washington St.
Middleburg, VA 20118

Fagan Arms Inc.
33915 Harper Avenue
Clinton Township, MI 48035
(586) 465-4637

Coal Creek Armory
10737 Dutchtown Rd.
Knoxville, TN 37932
(865) 966-4545

Martin’s Guns Shop
937 S. Sheridan Boulevard
Lakewood, CO 80226
(303) 922-2180

Web Based Appraisers



Time Of Year And Condition 135
Dealer’s Responsibility 137

Evaluating Condition 143
Models Currently In Demand 144
Crescent Firearms Co. 144
Price Trends 146

Models Currently In Demand 147
How To Evaluate Condition 149
Price Trends In Rimfires 150

Models Currently In Demand 151
Evaluating Condition 152

Models Currently In Demand 155
Price Trends In Handguns 156

hapter 6

– Trading in U
sed G




Gun trading is an old American tradition. In
the past, trading provided many people with
their only means of owning a firearm. Some
gunsmiths bought and sold used guns to boost
their profits, while others found gun trading an
excellent means of building up a gun collection.
The practice continues today.
Most gun enthusiasts — whether hunters,
shooters, collectors, or dealers — will, at some
time in their lives, buy and sell used guns. The
main objective of this practice is to pick up a
real bargain and sell it for a good profit. To ac-
complish this, you have to be able to identify the
gun and know its model, rarity, and condition.
If parts are missing, you need to know if they
are readily available and how much they cost.
You need to know if the parts in a particular gun


are all original or if the gun has been assem-
bled from several junked guns. You must know
whether the finish is original or whether the
firearm has been refinished. If the gun is a very
rare model, you need to be sure it is authentic.
These are important factors to consider when
buying and selling used guns.
In this lesson, you will learn what to look for
when trading in used shotguns, rifles, handguns,
and the growing branch of black powder arms.


*Note: The dollar amounts listed in this lesson may not be
current or may only be representations of value.

Figure 1: Winchester Model 94 carbines manufactured before 1964 have risen to “collector” status. Those made prior to
1964 have a serial number 2,700,000 or below.

When buying or trading used guns as a busi-
ness, bear in mind that you must make a profit
to stay in business. You cannot buy a used gun,
keep it for any length of time, and then sell it
for less than 20 percent profit. Many used gun
dealers try to make 30–40 percent profit on
each sale. However, the average profit realized
nationwide is a little lower: 25–30 percent. So,
if you are offering to purchase a gun from a
customer and you think you can resell the gun
for around $200, your first offer should be no
higher than $120*.
For example, assume that a customer walks
into your shop with a pre-1964 Winchester
Model 94 carbine in very good condition that
was manufactured about 1956 (Figure 1). It
is chambered for .32 Winchester Special. You
check the pricing guides and find this particular
model listed at an average retail price of $350 in
this condition. Normally, you should offer $210-
$250 for the carbine. However, perhaps another
one of your customers has asked you to look for
such a gun to complete his or her collection.

The customer will immediately pay $350. You
can then go as high as $300 for this gun, know-
ing that you will make $50 profit from the other
customer. Winchester model 94s made before
1964 can be identified by a screw in the bottom
of the finger link as shown in Figure 2 on the
next page.

The time of year plays an important role in
obtaining the best gun buys, although there
seems to be no particular “bad” time to buy or
sell collector guns. They are always in demand,
with new models being added to the list con-
stantly. Hunting guns are a different story. You
will normally obtain the best deals on hunting
guns from January through July. In August and
September, you can get top dollar for the guns
you purchased earlier to supply the demand for
the forthcoming hunting season. However, this
means that you could have a substantial invest-
ment sitting on your gun rack for six to eight
months, not earning you any money during this
time. But this is how the gun business operates,
and this is the reason you cannot pay too much
for a used gun and expect to stay in business.
Always consider a firearm’s condition when buy-
ing or trading used guns. The condition of the
firearm affects the price a collector will pay for


the gun. For example, not long ago, Winchester
Model 1886 standard lever-action rifles in good
condition were selling for $850-$1,000 each.
Gunsmiths and dealers were buying them for
$550-$800 each for resale. However, one dealer
in Virginia came across a Model 1886 in excel-
lent condition, as though it had just been un-
packed from its carton. After purchasing the
rifle, the dealer made a call to a collector in
Florida, and within minutes a certified check
for $4,800 was on its way to the dealer. This
is an example of why you should know how to
evaluate the condition of all firearms and adjust
your price accordingly.

When buying or trading used guns for hunt-
ing or target work, you must also know how
to evaluate the working condition of the guns.
Obsolete guns that are not in the collectible
class do not resell very well, and usually bring
the lowest prices. Some of these include old ri-
fles and shotguns, like the one shown in Figure
3, manufactured by U.S. and foreign firms for
mail-order houses. Considerable time and ex-
pense are often involved when one of these ob-
solete weapons needs a replacement part. Often,
the only solution is a handmade part, which can
be quite costly, depending on how long it takes
to make it.
One common problem with some of the obsolete
pump and semi-automatic shotguns manufac-
tured for chain stores is that the operating han-
dle bar breaks. Apparently, a low-grade steel was
used in these bars. Replacement parts are no lon-
ger available from the manufacturer, so existing
parts must be repaired or new parts constructed
by hand. Some owners of these guns have taken
the operating bar to a local welding shop and
had the parts brazed together. However, the high
heat required to braze the parts together often
softens and weakens the metal even more, so the
parts usually break again soon.
Repairing these bars requires that the weak
metal be cut away and a new piece be silver-
soldered (with heat not exceeding 1,100° F)
and then shaped to operate properly. The job
costs about $35 or more, and the gun is not
worth $100.

Figure 2: Bottom view of a Model 94 receiver.

Figure 3: High Standard Arms once made thousands of inexpensive
shotguns for mail-order houses like the Flite King Field slide-action shotgun.


Some Spanish and Italian double-barrel shot-
guns of recent manufacture are in this same
category. The manufacturer is either out of busi-
ness or has started making other models, or the
importer has dropped the line. Under these cir-
cumstances, replacement parts are nearly impos-
sible to locate. Profits made on guns that later
prove irreparable are not worth the customer
dissatisfaction that follows. All guns can usually
be repaired by a capable gunsmith, of course, but
at current labor prices, it is usually not worth the
expense. Avoid these types of guns.

When you take a used gun in on trade or pur-
chase a used gun outright, it is your responsibil-
ity to make certain the gun is safe and functions
properly before reselling it. Often, a used gun
is traded or sold because it does not function
correctly. For example, the extractor may be
damaged, the locking lugs may be worn, or the
fired cases may show head separation or extrud-
ing primers. If these conditions exist, the gun
probably has excessive headspace and needs to
be corrected. If an inexpensive gun does have
headspace problems, it requires either that the
barrel be set back or that the gun be rebarreled.
Both jobs often cost more than the gun is worth.
Trigger pull may be a problem. If the trigger
pull is too heavy, it can usually be lightened
fairly easily. If it is too light, it could mean a
simple trigger adjustment (Figure 4). However,
a light trigger pull can also mean excessive wear
on the trigger and sear, or both. You must decide
whether the gun is worth the price if the trigger
and sear have to be replaced.
You should always check to see if the empty
gun “fires” when the bolt closes or when the
buttstock is lightly tapped on the floor. Place
the safety on, then off, and see if you can make
the gunfire by twisting the bolt and/or exert-
ing pressure against the hammer or the cocking
piece. If the gun fires (causing the firing pin to

fall) under any of the above circumstances, do
not buy or sell it until you know the problem
and the estimated cost of repair.
Rechambering a modern rifle from one high-
intensity cartridge to another is perfectly ac-
ceptable, as long as the work is done correctly.
However, any collector value is usually lost
when such a conversion is made. Examine con-
verted weapons carefully before buying, giving
consideration to the quality of the conversion
and several other factors, such as age of the gun,
type of conversion, etc.
A Winchester Model 92 rifle in good condition
is considered safe when correctly converted to
handle .357 Magnum cartridges. Hundreds of
these conversions have been made. However,
this same conversion made to a Winchester
Model 73 could be hazardous.
Be aware of conversions of older rifles (those
manufactured before 1930). Some of these guns
were made of soft steel, and while safe for the
cartridges for which they were originally cham-
bered, they were not stressed for modern loads.
Unless the serial number indicates that the

Figure 4: Rifles with adjustable triggers can be adjusted
in minutes.


condition exists, the cost usually prohibits hav-
ing the problem repaired, except in high-qual-
ity firearms.
To check for excessive play, open the action on
the shotgun, holding the forearm tightly in your
left hand and the grip tightly in your right hand.
Twist in opposite directions; you should be able
to detect any “play.” Also check the hammer
sears as shown in Figure 5.
Check bolt-action first with the bolt open, then
with it closed. Twist and jiggle the cocking piece
and bolt; you should be able to detect excessive
wear. Some will even “fire” when the cocking
piece is twisted. Such guns are obviously in need
of repair, and you should take this into consider-
ation when trading.
There are several models of guns that, although
in good condition, are not very valuable because
ammunition for them is hard to find. This cate-
gory includes the 7.65 Argentine Mauser, shown
in Figure 6. Norma® manufactures ammo in this
caliber, but it costs over $1 per round. However,
some shooters can use this scarcity of ammo to
their advantage. Let us assume that a person
wants a centerfire rifle to use once a year dur-
ing deer season; he or she does not care to use it
any other time. Any bolt-action centerfire rifle
in good condition will cost over $200 if cham-
bered for a modern, readily available cartridge.
In this case, it may pay to buy a rifle chambered
for an obsolete cartridge and pay the premium
price for the hard-to-find ammo, since a box of
20 cartridges will probably last for years.
Brass for most obsolete centerfire cartridges can
be formed from existing cartridges and then re-
loaded. In fact, in recent years, some small firms
have started manufacturing obsolete brass. If
there is a way to save money by buying a par-
ticular rifle chambered for an obsolete cartridge,
this could work to your advantage. However, as
a rule of thumb, obsolete guns with little or no
collector value should be avoided or bought at a
low price.

Figure 5: Beware of exposed hammer models with double
hammer sears. Often, one of the sears is broken. Repairs
can be made by welding, but you must consider the time
involved and adjust your offer accordingly.

converted gun is of fairly recent manufacture
and/or is in excellent condition, it is usually best
not to buy it.
When buying a modern gun for shooting, al-
ways check the bore to make sure it is in good
shape. If it is not, it is best not to buy the gun
unless you can afford to rebarrel it. Rust in rifle
bores leaves pits which cannot be removed, and
although the gun may still be accurate, guns in
this condition are always more difficult to sell
than those with good bores. Rust is often an in-
dication that the entire gun has been neglected.
A loose rifle action or a break-open shotgun ac-
tion with excessive play can have many causes:
firing high-pressure Magnum loads, wear,
abuse, or improper gunsmithing. When such a


Figure 6: The Argentine Mauser is perfectly safe (in good condition) with the cartridge for which it was originally
chambered. However, if rechambered for a cartridge with higher breech pressure, it may not be safe. Carefully inspect all

In general, you should only purchase used guns
that are in good condition and that will sell
quickly if you ever decide to get rid of them. If
work is required to make a particular gun safer,
more accurate, operable, or presentable, make
sure you take into consideration the cost of this
extra labor and parts. Remember, it is best to
pass up a marginal bargain, or one that you are
not sure of, than to buy and lose money because
the gun will not perform the way you want or
sell at the price you expect.




Figure 7A: The Winchester Model 37 shotgun.

Shotgun Trading
High-quality shotguns — like the Parker, L.
C. Smith, and Winchester Model 21 — have
always been in demand by collectors. As these
guns become scarcer and the number of collec-
tors multiplies, many people are starting to col-
lect other types of modern firearms. Especially
popular are the shotguns manufactured before
1964. By the early 1960s, the firearms industry
was struggling due to the rising cost of labor.
Many manufacturers were losing money on ev-
ery gun they turned out and a solution had to be
found if they were to stay in business. The need
for machine-produced guns with a minimum of
hand labor seemed to be the only answer; but
would people buy these guns?
A survey conducted about that time by the fire-
arms industry revealed that only approximately
10 percent of the market consisted of people
who appreciated and demanded fine handi-
work. The other 90 percent were satisfied with
less artistry, as long as the firearm was safe, in-
expensive, looked fairly decent, and was capable
of reasonable hunting accuracy. As a result, gun
manufacturers began mass-producing machine-
made guns with burned-in checkering patterns
on the stocks, stamping parts out of sheet metal,
molding some parts out of plastic, and using

aluminum and pot metal in castings formerly
made of machined steel. The artistry found in
American firearms made before 1964 is rarely
equaled today. Hence, there has been a growing
collector demand for these guns.
However, there were several models of shotguns
that were just not designed for mass production
solely by machines. Most of these have suc-
cumbed to the high cost of labor and materials.
Winchester tried to continue making its Model
12 and Model 21, but these finally became too
costly to manufacture. Now the Winchester
Model 21 is available on special order from U.S.
Repeating Arms Company from their custom
shop at a starting price of over $10,000.
In 1960, a standard-grade Model 12 Winchester
shotgun carried a retail tag of about $55. In
1963, the price of the same gun jumped to $110.
By 1968, when the Winchester Model 12 was
available only in Super Pigeon Grade, the price
was $825 — too much for the average hunter.
The Winchester Model 12 is still sought af-
ter by collectors, and good specimens sell for
at least $400 in standard grade. Of course, the
higher grades sell for much more.
Even the single-shot Winchester Model 37
(Figure 7 & 7A), which retailed for about $30
at the time it was discontinued, will bring an av-
erage price of $250. It sometimes sells for $600
or more for the rarer smaller gauges.


Figure 7: The Winchester Model 37 shotgun exploded view.


Figure 8: Inexpensive single- and double-barreled
shotguns can be tightened by peening around the pivot lug.

Many vintage European and English double-
barreled shotguns are not intended to handle
Magnum shotshells, even when the barrels are
made of fluid steel. They will take them for a
while, but regular shooting with high-velocity
or Magnum loads will eventually result in a
loose action. These guns are fine for upland
game shooting with light loads. In fact, many
hunters cannot think of a better firearm than
a light double 12- or 20- gauge for this type of
hunting. These guns handle and point nicely, are
not bulky, and weigh quite a bit less than their
autoloading or slide-action counterparts.

To check for looseness in a single- or double-
barreled shotgun, hold the gun with one hand
on the forend and the other on the buttstock
at the grip. By twisting your hands in opposite
directions, you should be able to detect any play.
Headspace can be checked by holding the gun
up to the light so you can sight at the gun where
the barrel meets the standing receiver. If you can
see light through this gap with the action closed,
the gun is probably dangerous to fire. You can
also use a standard blade-type feeler gauge (the
kind mechanics use) to check the gap between
the barrel and the standing breech.
If any of the above conditions exist, they will
have to be corrected before the gun can be used
safely, and of course, the price you offer should
be set accordingly. If the shotgun is an inex-
pensive model, you can tighten the action by
peening lightly around the semicircular cutout
just behind the edge of it (Figure 8). If this is
done correctly, and if looseness is not excessive,
the metal will be displaced and moved slightly
forward to close the gap. When the pivot-pin
junction is tight, smooth the sides of the lug
where the opening has been peened with a pil-
lar file. On the better grades of shotguns, more
care should be used. Raising indentations with a
punch directly in the semi-curved lug will hide
the work, but this peening should be even in or-
der to make the barrels open and close smoothly.
A loose action can also be caused by a worn piv-
ot pin, requiring the original pin to be replaced
with a new one. Since the strength and proper
function of the action depends on this pin, you
must be extremely careful when performing this


job. This is definitely not a job for an amateur.
You can estimate at least a $35-$50, or higher
charge for this installation, so price your shot-
gun accordingly.
Some older American, British, and European
doubles manufactured between 1910 and 1930
are chambered for non-stand 2½ in. (12-gauge)
shotshells, resulting in high pressures and blown
patterns when standard 23/4 in. shells are used.
You can correct these chambers with a shotgun
chambering reamer, but remember — you must
buy the gun at the right price in order to make
a profit.

In many areas, single-shot, break-open shotguns
move relatively well if the price is right. The
now-obsolete H&R Topper models in good
condition will sell for $50-$75; a Winchester
Model 37 will sell for $150 and upward; and
an Iver Johnson Champion in good condition
will go for around $90. It is hard to get more
than $50 for the cheap mail-order guns that
are circulating under various brand names such
as White Powder Wonder, World’s Challenge,
etc. These guns have been used strictly as util-
ity guns. Many are in poor condition with loose
actions, and are therefore unsafe. If one is in
relatively good condition, a dealer can normally
buy it for $25 or $30 and sell it for $50. Models
requiring extensive repairs should be saved as
“parts” guns.

Used double-barrel shoguns vary greatly in price
— from as low as $50 to as high as $100,000 —
depending on the make, model, condition, etc.
Around 1900, many double-barreled hammer,
breech-loading shotguns were manufactured by
various firms for the mail-order houses and local
hardware stores, many carrying Damascus bar-
rels. However, they are currently in demand as
wall hangers, and the cheaper grades in relatively
good condition sell for $75-$175. Those made
by Parker Brothers sell for as much as $500.
The better grades of these exposed-ham-
mer shotguns include L. C. Smith, Parker
Brothers, Ithaca, Baker, Greener, Norwich, and
Remington No. 3 Grade. When fitted with
Damascus barrels, none of these guns will sell
for much over $200. However, if equipped with
steel barrels, and if they are shootable, the price
usually doubles and sometimes triples.

The Crescent Firearms Company was founded
in 1888 and operated in Norwich, Connecticut.
It has been said that this company was the most
prolific of all manufacturers of private label guns,
producing at least 400 different brand names.
In 1893 H&D Folsom Arms Company of New
York City purchased Crescent. This firm sold
guns manufactured by Crescent under a va-
riety of names. In fact, if a certain number of
the same model of gun was ordered, the buyer
could have almost any label he or she wished
stamped on the arm. For this reason, many


hardware stores of the time, which sold dozens
of single- and double-barreled shotguns each
year, had their own firm name stamped on the
guns — causing even more confusion among
gun collectors. The shotguns listed below are
known to have been produced by the Crescent
Firearms Company and carry any of the brand
names or private labels in the list. In effect, all
of these double-barreled, side-by-side shotguns
were identical except for the names stamped on
them. The same was true for their single-shot,
break-open models.

T. Barker
Bellmore Gun Company
C. G. Bonehill
Carolina Arms Company
Central Arms Company
Cherokee Arms Company
Chesapeake Gun Company
Columbian New York Arms
Cumberland Arms Company
Elgin Arms Company
Elmira Arms Company
Empire or Empire Arms
Enders Oak Leaf or Enders
Royal Service
Faultless Goose Gun
F. F. Forbes
C. W. Franklin
Harrison Arms Company
Hartford Arms Company
Henry Gun Company
Hermitage Arms Company or
Gun Company
Howard Arms Company
Interstate Arms Company
Jackson Arms Company
Kingsland Special
Kingsland 10 Star

J. H. Lau & Company
Leader Gun Company
Lee Special
Lee’s Munner Special
Liege Arms Company
J. Manton & Company
Massachusetts Arms
Minnesota Arms Company
Mississippi Valley Arms
William Moore & Company
Mt. Vernon Arms Company
National Arms Company
New Rival
New York Arms Company
Nitro Bird or Nitro Hunter
Norwich Arms Company
Not-Nac Manufacturing
Occidental Arms
Oxford Arms Company
C. Parker & Company
Pioneer Arms Company
Queen City

W. Richards
Charles Richter
Rickard Arms Company
Royal Service
St. Louis Arms Company
Shue’s Special
Sickels Arms Company
Southern Arms Company
Special Service
Spencer Gun Company
Springfield Arms Company
Square Deal
State Arms Company
Sullivan Arms Company
Ten Star
Ten Star Heavy Duty
U.S. Arms Company
Victor Special
Virginia Arms Company
Vulcan Arms Company
Warren Arms Company
Wilkinson Arms Company
Wilmont Arms Company
Wilshire Arms Company
Wiltshire Arms Company
Winfield Arms Company
Winoca Arms Company
Wolverine Arms Company
Worthington Arms Company


No one can predict the future, but by gathering
and analyzing certain statistics, one can come
close to guessing the outcome of an event. This
is true of firearm trends.
To give you an idea of how the trend in used
shotgun prices has been going over the past 20
years, most quality shotguns have increased in
price more than 400 percent; the cheaper mod-
els have increased from 62 percent to 188 per-
cent. For example, in 1972, the average used gun
price for an L. C. Smith Premier shotgun in ex-
cellent condition was $2,700. Today, it is worth
more than $10,000. Lower-priced guns, like the
Savage Model 430 shotgun, brought an average
used gun price of $115 in 1972; today, the same
model is valued at over $500.
Used shotgun prices during the 1990s seem to
have leveled out, and they are not likely to in-
crease as rapidly over the next 10 years as they
did the decade before. But again, nobody knows
for sure.


Figure 9: Virtually any Winchester rimf ire in good condition and manufactured before 1964 is currently in the collector

Rimfire Rifle Trading
It is quite possible that more .22 rimfire rifles
are bought and sold each year than any other
type of rifle. While many of these are sought by
collectors, most are working guns, which means
they are used for training young shooters, for
target work, or for hunting small game. Since
.22 rimfire ammunition is the least expensive of
all, this rifle group is used the most for plinking
or target practice in this country and abroad.

Pre-1964 Winchester rimfire rifles, like the
one in Figure 9, are sought by many collectors.
Prices for these models have risen sharply in the
past few years. In 1964, Winchester and other
manufacturers changed from a machined re-
ceiver to a stamped receiver.
The early Stevens single shots, such as the
Walnut Hill and Armory Model, are also com-
manding high prices. But the rifles that bring
the most money are the high-quality match
rifles like the Winchester Model 75 Target and
the Winchester Model 52 in its variations.
For small-game hunting and plinking, the
.22 rimfire semi-automatics outsell all others
by a wide margin. You will probably see more
Savage-Stevens Model 80 rifles on used gun

racks than any other type. As a working gun, the
Savage-Stevens seems to be most popular, with
Marlin semi-automatic rimfires holding a close
second. However, few people are interested in
actually collecting this model.
In comparison to the high collector interest
in high-quality shotguns and certain center-
fire rifles, veteran collectors have traditionally
shown little interest in rimfire rifles, except for
rimfires manufactured before 1920, such as the
Winchester Model 1873s, Colt slide-action
repeaters, etc. The more conventional rimfire
rifles were usually purchased only for hunting,
target shooting, and plinking. However, during
the past few years, the popularity in rimfire rifle
collecting has increased tremendously and is
still rising at a phenomenal rate.
There are several reasons for this upsurge. First,
the increasing costs of all collectible centerfire
rifles require some serious thinking on the part
of the buyer. Gone are the days when you could
purchase 10 pre-1964 Model 94 carbines for
$35. Now one of these guns costs over $200. A
Winchester Model 86 will go for over $1,000
in good condition — too much for the average
collector to spend regularly.
Second, the growing numbers of collectors have
bought an unbelievable quantity of firearms,
and today’s avid collector can become frustrated
easily and bored by the lack of unusual or excit-
ing acquisitions.
The third and most important reason is the
availability of rimfire rifles and the opportunity


Figure 10: The f irst Winchester semi-automatic rifle — the Model 1903 — was invented by Thomas C. Johnson.

to get a very good buy. There are many .22 rim-
fire rifles in use today, most of which have been
around for a long time. Some owners who use
these rifles as tools (like a farmer) are interested
in trading them for more modern arms that will
be more useful. To illustrate, many of the old
bolt- action rimfire rifles are not easily adapted
to scope sights — the bolt will hit a top-mount-
ed scope when the action is operated, many eject
out of the top of the action, and the receiver must
be drilled and tapped for scope mounts. Such an
installation could cost $25-$35. Rather than pay
this amount, the owner would probably choose
to trade in the gun for a new one. Transactions
like these occur daily. A collector of .22 rimfire
rifles can go into a used gun shop two or three
times a week and usually find some new items
on the shelves every time.
As with other types of firearms, the pre-
1964 rimfire rifles are in demand the most.
Winchester, Remington, and Savage-Stevens
are the best sellers. Rifles such as Noble, J. C.
Higgins, High Standard, and even the late mod-
el Winchesters (Models 250, 270, 150, and 290)
have little collector value. All are good shooters,
though, and are highly recommended as a first
gun or for hunting or plinking. However, you
may find that some of these models have poor
accuracy, and malfunctions are common. Parts
are also hard to obtain particularly for those
models that were specially made for the mail-
order houses.

Generally speaking, virtually any Winchester
rimfire rifle in good condition and manu-
factured before 1964 is in the collector sta-
tus and should make a good investment. The
first .22 rimfire repeating rifle was the Model
1873, but this rifle was relatively heavy and
expensive and never gained much popularity
as a working gun. Despite their unpopularity,
rifles such as these demand the highest prices
from collectors of rimfires.
You should be aware of some of the other
Winchester rimfires that have collector value.
The Model 90 rimfire, for example, was light,
relatively inexpensive, and could hold 11-15 car-
tridges, depending upon the type used. Nearly
one million of these rifles were manufactured. A
shorter version of this model, called the Model
06, came out in 1906. Both the Model 06 and
Model 90 were popular for gallery use as well as
for plinking and hunting small game. In 1932,
Winchester came out with an improved version
of the Model 90, the Model 62. Winchester also
developed a concealed hammer pump in 1932,
the Model 61.
The first Winchester semi-automatic rifle,
shown in Figure 10, was invented by Thomas
C. Johnson and was called the Model 03.
Earlier models were chambered only for the .22
Winchester Automatic cartridge. At this writ-
ing, cartridges are still available at a retail price
of about $15 per box. So if you are in the market


This Remington Sniper Rifle 1903, sold at auction for over $3,000.

for a plinking rifle, this model obviously would
not be first choice. In 1933, this rifle was re-
vamped, chambered for the .22 Long Rifle, and
renamed the Model 63.
A new semi-automatic rifle was introduced in
1939. It was chambered for .22 Shorts in the
Gallery Special model. In 1940 the .22 Long
Rifle chambering was added for sporting rifles.
The Model 1900 single shot was Winchester’s
first bolt-action rimfire rifle. Through vari-
ous improvements, it became known as the
Model 02, and then the Model 04. In the
later version, a thumb-trigger rifle was introduced
which had no trigger or trigger guard. Instead, a
thumb latch released the firing mechanism. This
rifle was eventually called the Model 99.
Other Winchester bolt-action rifles include
Models 58, 59, and 60. The Model 60 was later
revamped to become the Model 67. Then came
the Model 52, Model 75, and other models suit-
able for target work.
The development of Remington products
closely paralleled that of Winchester; that is,
they too brought out pumps, autoloaders, bolt-
actions, etc. However, many shooters felt that
the quality of Remington rifles was not quite up
to par with the Winchesters. This may or may
not be true, but at the present time, Winchester
arms are selling for more than Remingtons. For

example, the Winchester Model 61 slide-action
rifle in excellent condition is worth about $350.
Remington’s Model 12 slide-action is valued at
around $200.
Rifles of other manufacturers have yet to reach
the stature of Winchester and Remington rim-
fire rifles. However, as the supply of these more
desirable arms diminishes, the less-pursued
ones are certain to increase in value. This might
be the avenue to follow if you are considering a
reasonably priced gun collection now, which you
hope, will payoff in the future.

An earlier lesson covered the NRA method of
grading firearms using the terms “Excellent,”
“Fair,” “Good,” etc. Since an “antique excellent”
is different from an “excellent” modern gun,
many professionals now use a different method
to grade firearms — namely, the percentage of
original factory finish remaining on the gun.
Any method you employ will take some prac-
tice, but eventually even the novice will be able
to tell the approximate amount of bluing re-
maining on the gun.
Of course, the condition of the wood is also tak-
en into consideration when pricing used guns,
but most collectors consider the bluing for de-
termining the basic condition.


After you have some experience, you will learn
that some types of firearms wear differently
than others. Bluing on some arms will wear off
first in a particular location, while on others
this location varies. Besides the muzzle, these
locations are usually where the gun is touched
most by the shooter’s hands or body. In a tubular
magazine rifle, for example, the bluing will be
worn off at the top of the magazine tube where
the shooter has gripped it to unscrew the maga-
zine tube.
After you examine and evaluate the outside con-
dition, you should inspect the bore. A rifle that
will not shoot accurately is practically worthless.
Even if the gun is solely for a collection and will
probably never be fired, no one will pay top dol-
lar for it if the gun will not shoot as it should.
When looking for a serviceable rimfire rifle for
hunting or plinking, you will want to run several
tests with it to make sure it is functioning prop-
erly. If you are purchasing the gun from a dealer,
be sure to get a guarantee that the gun will func-
tion properly. If it does not, see that the dealer
agrees to repair it or will pay to have it repaired.
The most common malfunctions of rimfire
rifles include burred or scratched chambers
and peened muzzles. Repeating and semi-
automatic rifles can misfeed due to hardened
grease and foreign matter in the receiver and
extractor recesses. In these areas, the problem
is compounded by the lubed ammunition and
by the comparatively small size of the various
action recesses.

In most cases, ailments in .22 rimfire rifles can
be corrected by a good cleaning and/or the re-
placement of a minor part. Feeding problems,
for example, can be caused by dents or debris
in the magazine tube; weak or broken magazine
springs; bent, broken, or blocked cartridge stops
and cutoffs; and worn carriers or carrier cams.
Faulty extraction and ejection are most often
related to badly fouled or burred chambers or to
jammed extractor springs.
As mentioned previously, many problems asso-
ciated with repeating rifles can be corrected by a
thorough cleaning and degreasing, so make this
your first operation. Strip the gun down to its
basic action components and clean and degrease
them thoroughly. Once the parts are clean, those
requiring replacement or touching up are fairly
easy to detect.

The .22 rimfire rifle has been a relatively low-
priced firearm with the exception of the high-
er-grade target rifles. Even the better English
and European gunmakers who made the finest
double shotguns and drillings seldom put forth
the same effort when building a .22 rimfire rifle.
There were exceptions, of course, but as a gen-
eral rule, 22s never got the attention that their
bigger-bore counterparts did.


Figure 11: The Marlin Model 336 seems to outnumber the Winchester Model 94 about 3 to 1 when a lever-action deer
rifle is desired.

Centerfire Rifle
Second only to high-quality shotguns in price
increases over the past decade are centerfire
rifles. Other than some of the cheap military
models, it is difficult to obtain any centerfire rifle
these days for under $200. Even the Winchester
Model 94 carbine (post-1964 version) that re-
tailed only a few years ago for less than $100 is
selling for more than $400 as a used gun.

Any centerfire rifle in good shooting condition
will demand top dollar in the fall, when deer
hunting seasons open throughout the country.
If you have what might be classified as a work-
ing rifle — one that will be used for hunting —
the best time to sell is from mid-October until
mid-December. This, of course, is not the time
to shop for good buys if you happen to be in the
market for a working rifle.
Although a lot depends on the locale, most of
the better buys on centerfire rifles can be ob-
tained from January to March of each year.
There are a couple of reasons for this.

First of all, dealers know that non-collectible
rifles will move very slowly for the next nine
months, and many will be willing to lower their
prices at this time of year.
Second, there is one factor you might not real-
ize even exists. Frequently, construction work-
ers live in rural areas and commute to the city
to work. These workers are sometimes laid off
from their jobs during the winter months, when
adverse weather conditions prevail. They might
become short of cash before the work picks up
again in the spring, and they know that firearms
can bring in some money for them. The hunt-
ing season is over and they have plenty of time
to buy more guns before the next season. Each
year from about January 15 through March or
the first of April, most gun shops receive dozens
of phone calls and visits from such workers who
want to sell their firearms for ready cash. Few
guns are in the collector status; most are mod-
ern arms, such as the Marlin Model 336, shown
in Figure 11, the Mossberg bolt-action in .243
caliber, the Sears “Special,” or similar items.
Since January to March is a difficult time of year
to sell centerfire rifles, customers should not
pay top dollar for them. Discount them about
40 percent because they will probably have to
be “carried” until the next hunting season. This
means interest on borrowed money and, at to-
day’s rates, this can add up. However, by the


Side-by-side double-barreled rifles are very
costly, especially those made by Holland &
Holland, Westley Richards, and similar English
gunmakers. Sporting rifles manufactured by
Mauser are now bringing top dollar, as are the
Mannlicher-Schoenauer models.

Centerfire rifles are evaluated like any other
firearm— usually by the percentage of bluing
remaining on the gun. The stock and bore also
play important roles in determining final price,
but the general condition is usually evaluated
on the basis of original bluing. Note that we
said “original.” A refinished firearm will bring
less money than one in original factory con-
dition if it is in the collector status. However,
a modern centerfire rifle that has no collector
value will usually bring more money if it is pro-
fessionally refinished rather than if it is rusty
and in poor shape.
Bolt-action centerfire rifles seldom need repairs,
even if misused, but occasionally a problem
will develop that requires an expert’s attention.
Some of the problems to look for include poor
accuracy; binding breech bolt, improper feed-
ing, misfiring, defective safety, failure to extract,
and failure to eject. Too much headspace is also
common in some military arms.
Of these problems, excessive headspace is the
most serious. The other malfunctions will pre-
vent the gun from operating, but are seldom
dangerous to the shooter. Excessive headspace,
on the other hand, can endanger the shooter as
well as bystanders.
Bolt-action rifles have been the standard mili-
tary arm for many countries for nearly 100 years.
Many of them were imported to the United
States, distributed through gun dealers, and
now belong to individuals. The majority of these
guns were checked by the distributors, and the

same token, if a customer is interested in buying
a used centerfire rifle during this time, he or she
can be assured of getting a good price, about 20
percent less than he or she would have to pay for
the same rifle in the fall.
In the hunting classification, Remington cen-
terfire slide-actions and semi-automatics are
the most popular for woods hunting in the East,
followed very closely by the lever actions. The
Marlin 336 seems to outnumber the Winchester
Model 94 about 3 to 1 in certain areas because
of its side ejection, which allows a scope sight
to be mounted directly over and in line with the
bore. On the Winchester Model 94 (prior to the
Angle-Eject models), the scope must be offset
to allow for the cartridge ejection out of the top
of the receiver.
Hunters in the western part of the country stick
with the bolt-actions for greater accuracy on the
longer shots often necessary in flat country.
From the above discussion, it would seem that
different locations would have varied prices on
certain types of firearms. This is true to a cer-
tain extent, but there is not enough difference in
price to justify driving or flying 2,000 miles just
to buy one gun.
For collectors, Winchester arms are the best,
and any of those that bear factory engraving,
deluxe stocking, or a presentation inscription
command a substantial premium. The best-
known Winchester inscriptions are the “One of
One Thousand,” “1 of 1,000,” and “One of One
Hundred” on premium-grade Models 1873 and
1876 rifles. If such a gun can be authenticated as
a premium-grade factory issue with any of the
above inscriptions, and if it is in good condition,
you have a firearm worth $45,000 or more. But
be cautious when purchasing such an arm. It is
very easy to have an engraver do inscriptions on
any rifle, and the practice has been done more
than once.


Figure 12: Use headspace gauges to test used military

bad ones were rejected and dismantled for spare
parts. The better ones were sold for shooting.
However, some of the rejects happened to get
through and many have “let go,” sending hot gas
and flying brass particles back into the shooter’s
face. Therefore, before firing any foreign mili-
tary weapon, always check the headspace with
a gauge like the ones in Figure 12. Better yet,
check it before buying the gun. If the headspace
does need to be corrected, you are better off
not buying the rifle. Occasionally, a headspace
problem can be corrected by installing a slightly
over-long bolt; otherwise, the problem must be
solved by setting the barrel back.
A defective safety should also be corrected im-
mediately. In most cases, this problem can be
traced to a worn or altered cam on the firing pin.
If the safety binds, try filing the bearing point
on the firing pin, taking only a small amount of
metal away at a time until the problem is cor-
rected. If the safety is tight in the bolt sleeve, it
may be fitted, but usually a new safety is suggest-
ed. When such problems are found, an adjust-
ment in the selling price of the gun is warranted.

Centerfire single-shot rifles are in great de-
mand. Most use the falling-block design, and
some have very complex mechanisms, requiring
some very expensive repairs. So check them out
thoroughly before you reach a deal.
Although a collector’s item, the Remington
Rolling Block single-shot rifle is low on the list
when it comes to value. Most of these should be
retired to the wall rack and not fired. However,
they can be made to shoot cartridges of moder-
ate pressure by using one or more of the follow-
ing suggestions: bush the firing pin (add bush-
ings to make the firing-pin hole smaller), reface
the breech blocks, or adjust the trigger pull. You
will also want to give them a very close exami-
nation to detect any hairline cracks that may be
present in the action or parts.
The worst, and most common, problem that oc-
curs in the older centerfire lever-action rifles is
looseness caused by wear of moving parts. You
will find that some original round holes in parts
have become egg-shaped, mortises in the re-
ceiver are worn, and metal has been shed from
mating surfaces. Any of these defects can lead to
malfunctions, making the gun unsafe.
You may encounter feeding problems caused by
dented, dirty, or corroded magazine tubes and/
or weak magazine springs. Recesses in the re-
ceivers are prone to collect bits of debris and
foreign matter which, when combined with gun
oil and grease, cake and gum up the action, caus-
ing feeding, extraction, and ejection problems.
The third most common problem in older le-
ver-actions is excessive headspace. These rifles
lock up at the rear of the sliding breech bolt and,
after much firing, stretching occurs, causing ex-
cessive headspace. If you are buying one of these
rifles, it is best to check it out thoroughly before
closing the deal.


Remington Centerf ire Rifle

Malfunctions in slide-action rifles are second
in frequency only to the autoloaders. The big-
gest cause of problems with both of these action
types is the presence of dirt, dust, and assorted
debris that, when combined with gun grease
and oil, prevent proper operation. This is really
not a serious problem, since most of these mal-
functions can be corrected by giving the gun a
complete cleaning. However, if you find a gun
in this condition, you’d better inspect the bore
before buying it. Chances are an owner who
has neglected cleaning the receiver has not kept
the bore in good shape, which means it may be
badly leaded, rusted, or pitted — all conditions
which seriously affect accuracy.
Before purchasing a slide-action rifle for hunt-
ing, you will want to be reasonably sure the gun
feeds properly (does not double-feed); retains
cartridges in the magazine; has action bars that
do not stick; has an action that locks properly
and extracts and ejects as it should; cocks prop-
erly; functions safely; and does not discharge
when the bolt is closed.

Semi-automatic rifles are becoming very popu-
lar for deer hunting in the eastern United States.
Unfortunately, these guns have more malfunc-
tions than any other type of action made.
Besides feeding problems, you will find auto-
loaders that fail to extract fired cases, some that
will not eject, some that will not fire, and others
that will not lock up properly. It is difficult to
detect all of these problems by just looking at
a gun, but we will give you some tips in case
you do not have time to test-fire the weapon
thoroughly before buying it. Look for marred
screw heads. If you find these, chances are the
previous owner tried to take the gun apart to
fix it for some reason. Operate the bolt. Does
it feel free or does it slide roughly? If it slides
roughly, beware.


Figure 13: The Glock has become very popular for
personal protection.

Handgun Trading
No particular time of year appears to be the best
for trading in handguns — the business is good
all year long. Proposed and enacted firearm leg-
islation is one critical factor that boosts hand-
gun sales. Many people are afraid handguns will
be banned in their cities over the next few years,
and they want to make sure they have one for
self-protection before the laws are passed. Also,
with crime increasing at a rapid pace, home-
owners who have never owned any type of fire-
arm before are finding that they feel safer with a
handgun for protection.
Regardless of the reasons, you can be certain
that handguns will be on the best-seller list for a
long time to come, and any workable, safe hand-
gun is certain to rise in value over the years.

The modern handguns most in demand at
this writing are those manufactured by Smith
& Wesson. German Walthers are coveted, and
bring a good sum. The American Walther, dis-
tributed by Interarms, is also becoming very
popular, but does not command the money that
its German-made counterpart does. Other than
the Single Action Army model, Colt revolvers
seem to be losing some of their popularity, but
their semi-automatics are still selling well.
Both Smith & Wesson and Colt handguns are
top quality when compared to most production
firearms manufactured today. In testing a Colt
Trooper Mark III in .357 Magnum along with
an S&W Model 19 (also in .357 Magnum),
both obtained about the same smoothness and
The SIG is another modern handgun that has
doubled in value (and retail price) over the past
few years. It is a well-made pistol, but it retails

for nearly $1,500. The Walther — selling for
much less — is just as good. The Glock is popu-
lar with law enforcement agencies, and many
civilians are buying these for home protection.
Any of the better handguns are capable of per-
forming the function for which they were in-
tended. Selecting one for yourself or to sell in
your shop boils down to preference. Many peo-
ple want a handgun that is light, compact, and,
above all, has good accuracy. You can have all
the firepower in the world, but if your gun does
not shoot accurately, it will do you no good.
The gun you buy should be one that you are
comfortable with and can shoot properly. Both
the .41 Magnum and .44 Magnum are difficult
to master for beginning handgunners; the .357
Magnum does not have quite as much power,
and it is easier to learn to shoot than the larger
Magnums. You can use .38 Special cartridges
for low recoil and then work up to the heavier
Magnum loads.
Of course, if you just want a handgun to plink
with, a .22 rimfire is fine. This is not the best
choice for self-protection, but it may be better
than nothing in a life-threatening situation.


Millions of handguns have been manufactured
in the past, and over 50 million of these are cur-
rently in the possession of U.S. citizens.
The average handgun is presently purchased
in part for self-defense, which means that it is
fired very little when compared to those used
for competition, plinking, and hunting. These
seldom-fired handguns often remain in one
family for generations. Then these guns are sold
for various reasons and become part of the mas-
sive used-gun market. Police departments buy
hundreds of thousands of new guns each year.
So what happens to the ones that are replaced?
In most instances, they are traded as partial
payment for the new ones, or else they are auc-
tioned off — usually allowing law enforcement
personnel to have first bid on them. Many of
these trade-ins enter the used gun market. Add
to this the hundreds of thousands of gun enthu-
siasts, each of whom buys dozens of new guns
each year, and it is no wonder the number of
used handguns on the market is overwhelming.
The turnover is astonishing.
The condition of these used guns ranges from
useless junk to the finest models valued at sev-
eral hundred dollars, to priceless antiques de-
manding five-figure prices and more.
The semi-automatic pistols available on the
used market may be broken down into several
classes. First, there are the rare collector mod-
els such as the Lugers, Mausers, etc., which
will bring a four-figure price if they are in good
condition. The sporting-type .22 rimfire pistols
come next; most are manufactured domestical-
ly and include the nontarget Colt Woodsman
models and variations, plus the similar products
of High Standard and Ruger.
Pocket pistols are in a category of their own and
include such models as the tiny palm-sized pis-
tols in .22 rimfire and .25 ACE and the larger

.32 and .380 ACP pistols by Walther, Llama,
and Mauser. The military and police types are
typified by the 1911 Colt Government Model
and the S&W Model 39, as well as the Walther
P38 and similar models.
Revolvers may also be classified as inexpensive
plinking and hunting models such as manufac-
tured by H&R, Iver Johnson, and others. The
police versions, such as the Colt Trooper Mark
II and S&W Model 19 Combat Magnum, have
now flooded the market. Then come the com-
petition models that have been customized for a
particular shooter — costing $1,000 or more, in
addition to the original cost of the arm. There
are also “packages” like the one shown in Figure
14. These are specially produced by the manu-
facturer and bring a premium price.
When buying semi-automatic pistols, you
should avoid one particular class: the Spanish
semi-automatic pistols manufactured under
various names by countless companies from
1910 until the mid-1930s. Such guns were often
crudely made and contained the cheapest mate-
rials available at the time. Dimensional control
of critical areas — like chambers and bore —
was very poor, with a tendency to be oversized
to avoid high pressures and to facilitate func-
tioning. The principal problems encountered
with these handguns are poor design, soft work-
ing parts which wear rapidly or damage easily,
and substandard quality of work, all of which
add up to poor functioning, short service life,
and low durability.

If you compare prices of used handguns sold in
the U.S. over the past 10 years, you will find that
all have increased to some extent, some more so
than others.


Used handguns are usually valued at about 30
percent below retail price if they are in excel-
lent condition, because new ones of the same
model can be readily purchased from dealers. If
in doubt about the value of any handgun, see if
you can find the model listed in classified ads in
shooting publications. This should at least give
you a starting price for evaluating a particular

Figure 14: The Colt Python revolver, when contained in a case with accessories, is now in the collector class. Photo from



Sell Service 163
Look For The Best Buys 165
Stock The Right Guns 166
Choose The Right Location 166

Prices 170
Service 170
Advertising 171
Closing The Deal 174

Cash Or Credit? 175
Finding The Right Supplier 175

hapter 7 – Selling N





There was a time when any reputable gun dealer
could make a decent living selling new firearms.
Guns were priced so that the dealer could make a
reasonable profit on each sale; no discounts were
allowed. In fact, many of the better manufactur-
ers required that each dealer sign an agreement
not to reduce prices on their guns. If the dealer
was caught reducing prices, the manufacturer
revoked the dealer’s license to sell that particu-
lar brand of firearm. When this manner of gun
pricing was in effect, the dealer who sold the
most guns usually did so by providing the best
service — not the lowest prices — to customers.

Para Wild Bunch 1911


Today, such price fixing is unlawful because of
federal regulations. Manufacturers can only sug-
gest a selling price; they can no longer insist that
a retail price be maintained. In fact, few guns
currently sell for the full suggested retail price,
with the possible exception of certain limited-
production models.
In this lesson you will learn the reasons why most
new guns do not sell for the full retail price. This
lesson offers tips for selling new guns. You will
learn how to outdo your competitors — even
the discount houses in your area.

Figure 1: Weatherby f irearms are not usually offered for sale at discount houses. If you can sell this brand of f irearm in your
area, you can expect to get a good prof it on each sale.


Current Business
Historically, when the larger gun manufacturers
insisted that dealers maintain a certain retail price
on their firearms, even the big mail-order firms
like Sears, Roebuck and Montgomery Ward
were not allowed to cut prices. The Winchesters,
especially, were listed in these catalogs at full re-
tail price. However, today, once the merchandise
is shipped from the factory, the manufacturer
has no control over the selling price. For this
reason, it seems that every chain store tries to
cut prices more than others, resulting in sales of
most modern firearms at around dealer cost, or
somewhat below retail.
This practice of price-cutting may be good for
the consumer, but the small gun dealer is not
able to make enough profit for the effort to be
worthwhile. The large chain stores buy in quan-
tity, which enables them to obtain the best prices
possible. They also buy direct from the factory,
whereas a smaller dealer must go through a job-
ber or distributor. Individuals who shop around
can often purchase firearms at chain stores for
less than the dealer’s cost from a supplier. From

this, it would seem that there is no way small
dealers can compete… or is there?
Some firearms manufacturers refuse to ac-
cept orders from discount and chain stores.
Weatherby, for example, reportedly never sells
to discount houses (Figure 1). Custom gun
shops and sporting goods stores are their prime
outlets. If Weatherby sold to the discount hous-
es, they would lose much of their business from
the smaller dealers. Browning Arms is another
example (Figure 2). Although firearms from
Browning Arms are sometimes listed in mail-
order catalogs, they are listed at full (or nearly)
retail price.

The knowledge you have gained from your
Sonoran Desert Institute training puts you in
a good position to outsell competing businesses
— even the discount houses or chain stores that
offer firearms to the public at a price that you, as
a small dealer, would have to pay. You now have
the knowledge to recommend the right gun for
the individual customer or for any hunting con-
dition. Furthermore, you know what ammuni-
tion to recommend for various shooting situa-
tions, and once a customer gains confidence in
your ability as a gun expert, he or she will most
likely continue dealing with you.

Figure 2: Browning Arms is another manufacturer that lets the dealer make a fair prof it on his or her investment.


Figure 3: When selling new guns, gear up for service —
selling f irearm accessories, installing sights and offering
rifle sightings.

The most important asset that you have to of-
fer is your knowledge of gunsmithing. Few dis-
count houses have a gunsmith, or even a clerk,
who is capable of mounting a telescope sight
on a rifle they sell. Here’s where your Sonoran
Desert Institute training really pays off. In fact,
one gun dealer in Front Royal, Virginia, opened
his gun shop a few doors down from a Wal-
Mart Department store… purposely! He rea-
soned that people who purchased items from
this department store at a discount would need
help in installing the accessories, such as sights,
rifle slings, etc. His theory paid off. Consider
the following scenario: A customer buys a
centerfire rifle from the department store and
a telescopic sight and mounts, but the depart-
ment store does not offer an installation service.
As the customer exits the department store, the
small gun shop is in plain view, and since the
customer is anxious to try out the new purchase,
he or she stops at the gun shop. Since the new
rifle has already been drilled and tapped for
scope mounts, it takes the dealer only minutes
to install the scope and bore-sight the rifle. The
dealer charges the customer about $30.
While waiting for the scope to be mounted, the
customer browses, sees a nice rifle sling, and asks
the shop owner to install the sling. The shop
owner charges the customer another $20 for the
installation, along with the cost of the rifle sling.
The owner makes a few more dollars profit on
the sale of two boxes of centerfire ammo before
the customer leaves.
So, less than one hour after the customer pur-
chased the rifle and scope from the discount
department store, the small gun shop has
brought in nearly $75 from the same customer,
servicing the equipment purchased from the
department store.

But that is not the end of our story. Consider
this: While the shop owner is installing the cus-
tomer’s rifle sling, the customer notices an ammo
reloading display — a complete reloading kit for
less than $250. The customer also notices a list
of gunsmithing services posted on the shop’s
wall. In less than 10 days, the customer returns
to the gun shop and purchases the reloading kit
along with some smokeless powder, primers, and
bullets. Furthermore, the customer brings in an
old double-barrel shotgun for refinishing. Once
the customer is familiar with the expertise and
service offered at the small gun shop, he vows
to bring his future business there. This example
shows how expert training pays dividends.
Gun dealers who accept used guns as partial
payment for new ones have the right idea. Few,
if any, discount stores will accept trade-ins; nor
will they sell used guns. The practice of dealing
in used guns, along with new ones, will not only
increase the dealer’s firearm business, but will
increase his or her overall business as well. Many
collectors and shooters frequently drop in on
shops that handle used guns just to look around.
If they do not find what they are looking for,


they might at least buy a box of ammo, a gun-
cleaning kit, or another sporting goods item
while they are there.
The profits derived from used gun sales can
also be rewarding. As mentioned previously, it
is difficult for any small gun dealer to make a
high-percentage profit any more on a new gun
sale. On the other hand, many dealers make an
average of 30-40 percent profit on used guns,
and some profits go even higher.
If you know your business, offer good service
within a reasonable period of time, and charge
fairly for your work, you cannot help but suc-
ceed. Then, people will not shop simply for low
prices; they will also shop for good service. And
good service is what you are capable of giving.
Even though your new guns may be priced 10-
20 percent higher than the discount houses,
many customers will still buy from you because
you know your subject and you service what you
sell. This one word, service, can mean the differ-
ence between success or failure. Always remem-
ber this when selling new guns to customers.
So, there are ways to beat the discount houses. It
just takes a little extra effort on the dealer’s part.

Sometimes, a certain model of firearm does not
sell the way distributors hoped it would. Rather
than storing hundreds of these models in their
warehouse, distributors will offer the guns at a
substantial discount, sometimes even at factory
cost. If you think such guns will sell in your area,
this is the time to buy, even if you have to keep
them on your shelves a few months until the
hunting season arrives.
However, first, try to determine why the model
is not selling. For example, one inexpensive .22
rimfire, single-shot rifle that is no longer man-
ufactured had an extremely rough trigger pull
as it came from the factory. Buyers returned
these rifles to dealers by the hundreds, claiming
they could not hit anything with this rifle. One

enterprising dealer found a way to correct this
rough trigger pull, spending about 15 minutes
repair time on each rifle. He then purchased a
number of these guns at or near factory cost,
made the corrections to the sear and trigger, sold
them at about 10 percent below retail, and still
made a good profit. The owners of these refined
rifles are still probably using them today. If a
similar situation arises, you should know how to
correct trigger pull on any rifle (either by honing
or with the adjusting screws), and you should be
in a position to reap dividends in the same way.
Also look for dealers going out of business. In
such cases, a public auction is usually held where
individual guns or groups of guns are sold to the
highest bidder. If you know your business, you
can often pick up new guns at below factory
cost. Check in the Yellow Pages of your local
telephone directory under “ Auctioneers.” Call
each one and ask them to inform you of any
auctions they may be holding where firearms
will be offered for sale. Use the same procedure
for adjoining towns and cities. You should also
check your local newspaper for such auctions. In
addition, bankruptcy sales are normally listed in

Figure 4: Jobbers and distributors sometimes overstock
a particular model of f irearm or ammo. If you need the
item, or think you can sell this particular model in your
area, this is the time to buy.


Figure 5: The Marlin lever-action rifles still do very well for eastern deer and black bear hunting.

local newspapers, and the notices are sometimes
posted at the local courthouse.
The most probable source of low prices on new
guns and ammo is from your firearm distribu-
tor. Again, look for special fliers, like the one in
Figure 4, that advertise with the best deals.

You should always try to stock firearms that
are going to sell relatively fast. In areas where
deer and black bear are the only big game to be
hunted, it would not make sense to stock .458
Winchester Magnums or .470 double rifles nor-
mally used on African big game. Nor would it be
wise to purchase a lot of deer rifles immediately
after the season closes, knowing that it will be
months before the market will be ripe again.
The types of firearms that move the quickest will
vary from area to area, but here are a few tips that
should help you get started.
If you are starting from scratch, stocking one
or two inexpensive .22 rimfire semi-automatic
rifles would be a good choice. You might also
try a couple of inexpensive shotguns in 12-
, 20-, and .410 gauges. If you are beginning
in the spring, check to see if your area has a
spring turkey season. If so, a slide-action pump
or semi-automatic turkey shotgun would be a
good choice. Also consider one or two varmint
rifles, like ones chambered for the .222 or .223
Remington cartridges.

In the fall, just before deer season opens, Marlin
lever-action rifles in .30-30 are popular in
the East, but scoped bolt-action rifles in .243
Winchester, .270, and .30-06 usually sell the
best (Figure 5). You will also want a few .22
semi-automatic pistols and perhaps one or two
big-bore revolvers.
After a while, your sales will set the pattern for
future buys. You should line up a distributor
who offers good service where you can obtain
practically any model firearm available within
a few days. Then, if one of your customers re-
quests a model that you do not have in stock,
you can call your distributor and get the gun
within a few days.
Eventually, as you check your Firearms
Acquisition records, you will find out which
models are the most popular in your area. This
knowledge will help you buy and stock new
guns for future sales…guns that will move rela-
tively quickly without tying up your working
capital or causing you to be overstocked.

The location of your shop can mean the differ-
ence between success and failure. It stands to
reason that if there is a gun shop on every street
corner in your city or town, and all of them are
doing poorly, it is probably not the place to open
a business — unless you can offer something
substantially better. In fact, it may be better for


you to commute to another town, 20-50 miles
away, that has a need for a gun shop. However,
there are many ways to beat the competition.
Again, service is more important than price.
Always try to deliver on the promised date. This
will build your credibility and, in turn, bring
more customers to your shop. Many gunsmiths
and gun dealers make promises concerning de-
livery that they do not keep.
Honesty is still the best policy. Even if it means
losing a sale, do not make promises that you
cannot keep. You will be better off in the long
run. For example, if you know that it is impos-
sible to get a certain firearm in less than two
weeks, tell your customer this. Chances are, he
or she will not be able to get the gun any sooner
anywhere else. The customer will respect your
honesty about the situation.




Figure 6: Winchester Model 37.

Selling Techniques
For hunting purposes, slide-action and semi-
automatic shotguns are currently outselling
side-by-side and over/under doubles 10 to 1.
The reason may be partly due to firepower, but
perhaps the main reason is the higher purchase
price of fine double-barrel shotguns. Many
grades start at $1,000, and some go for far more.
The slide-action and semi-automatic shotguns
hold from two to five rounds (although three
shots are the maximum allowed for hunting in
most areas in the United States), and offer quick
shots at game.
In most areas, single-barrel, break-open shot-
guns move well, especially in .410 and 20-gaug-
es. These are relatively inexpensive pieces that
are often used as camp guns, farm utility guns,
or as a child’s first shotgun. Some single-shot
shotguns have even been offered by manufac-
turers as “Boy’s Models;” that is, the buttstock
has been shortened to better fit young shooters.
The barrels on these models are usually 26 in.
A premium price is often charged for this type
of shotgun, and single-shot shotguns that are
now in the collector status (like the Winchester
Model 37) always bring more money (Figure 6).
The only American manufacturers to pro-
duce single-shot, break-open shotguns in re-
cent years are Harrington & Richardson and
their successor, New England Arms. Stoeger

Industries imports their IGA single-shot mod-
el from South America.
“Boy’s Models,” are no longer produced, and
this can give you another source of income as
a gunsmith. For example, you can purchase one
of the Stoeger IGS single-shot shotguns in
20-gauge, with modified choke. At the same
time, purchase an extra buttstock for the gun. At
this point, you should have about $80 invested.
When a customer comes into your shop to pur-
chase his or her child’s first shotgun, have the
child try out the original gun as it came from
the factory. Chances are, the trigger pull will be
too long. Use your Brownells’ Pull and Drop
gauge to get exact measurements on the young
shooter. You can then offer to modify the exist-
ing stock to the shooter’s dimensions, and install
a recoil pad for an additional $75. All you have
to do is remove the existing buttstock, measure
the amount of wood that has to be removed,
and saw it to the same contour as the original.
A thin recoil pad is then installed and sanded
down as described in previous lessons.
At this point, the young shooter has a shot-
gun that fits better than the factory original.
Consequently, he or she will be able to shoot
better. Also explain to the customer that as the
child grows, the gun can be adjusted by install-
ing spacers under the recoil pad or by installing
a new, thicker recoil pad to make the trigger pull
longer. When the child reaches maturity, merely
take off the shorter stock, and replace it with the
factory original stock.


*Note: The dollar amounts listed in this lesson may not
be current or may only be representations of value.

So, you can take an $80 shotgun, offer your
expert advice to your customers, do 30 min-
utes work on the shotgun, and get $160-$200.
Discount houses cannot offer this same service.

If you sell one $100 gun at 25 percent profit
($125) or five $100 guns at 5 percent profit
($105), which transaction has been the most
profitable? In these cases, you made $25 profit
from the sale of one shotgun marked up 125
percent. You made $5 profit from the sale of the
shotgun marked up 105 percent, but since you
sold five of the latter, you also made $25 profit
from the lot. It seems that you made the same
amount of money on both deals… or did you?
Let’s see.
Let’s say you purchased the first shotgun for
$100 (including shipping charges) three months
ago, and you borrowed money from your local
bank at 12 percent interest to purchase the gun.
This means that by the time you sold the gun, it
had actually cost you $100 plus $3 interest, for
a total of $103. You cleared $22 on the gun (less
operating expenses).
Now consider the five guns. Since you purchased
all of them at one time, you saved $1 shipping
on each one ($99 each). Therefore, the total cost
of the guns was $99 x 5 = $495. You again bor-
rowed money from your local bank at 12 percent
interest to make this purchase. However, due to
the lower price, these five guns sold in 30 days,
costing you only $4.95 interest on the borrowed
money, for a total investment of $499.95 for the
five guns. You sold them for $525, giving you a
clear profit of $25.05.

At first glance, it seems that you made about
$3.00 more on the sale of the five guns. But re-
member, it took you five times longer to fill out
the required forms, chat with the customers, etc.
So did you really make more money?
You can go either way, but remember when you
cut your profit down to a minimum, your vol-
ume of business has to be great. Also, if you have
a problem with one of the sales, you do not have
very much profit to fall back on.
We have found that few dealers can stay in busi-
ness very long making less than 20 percent prof-
it from sales. Consider this fact when you start
pricing your guns.

Your knowledge of firearms and the ability to
repair or customize them puts you in a good
position to sell new guns. You should be able
to recommend the right load or cartridge for
any game or sport, mount or adjust any type of
sight, and install sling swivels. Furthermore, you
should know how to modify your customers’
guns to suit their needs. For example, when you
sell a new rifle or shotgun, perhaps the shooter
is very tall; he or she sees too much of the bar-
rel when bringing the shotgun up to aim. You
immediately know that your customer needs a
longer buttstock. You also know that you can
correct this situation by first using your Pull and
Drop gauge to take exact measurements, and
then installing the correct thickness of recoil
pad onto the buttstock.
You have a better chance of selling a telescope
sight for a rifle if you know how to mount it
and then bore-sight the rifle. Once these two
steps have been accomplished, you can instruct
the purchaser how to fine-tune the sighting of
the scope to suit his or her eyes.


These services increase your chances of selling
new guns. Even if you make only 10 or 15 per-
cent profit on the gun itself, your knowledge of
recommending and installing accessories can
reap dividends (Figure 7).
Your superior knowledge of firearms, along with
the services you have to offer your customers,
is one of the biggest advantages you possess to
help you sell new guns. Use this knowledge and
your abilities.

When you first start a business, you must let
potential customers know about it. Advertising
is the way to do this. However, most small busi-
ness operators are untrained in advertising. As
much as some businesspeople downplay the
value of advertising, the fact remains that adver-
tising is still a business operator’s best tool for
attracting customers or establishing a market
and demand for a product. The lesson “Promoting
Your Business” contains greater detail.
Effective advertising is a critical element in the
ultimate success of any business. Your first ques-
tion is probably going to be, “How do I start?”
By following a very basic outline, any new or
existing business can take the first step towards
implementing an effective ongoing advertising
program. Stick to that program and in time your
business will become successful, because you will
have become a smarter, more effective advertiser.

Step 1: Determine the identity or image
you want to create for your company or

This is not always as easy as it might seem,
because it requires a great deal of objectiv-
ity. It also requires a strong commitment
and a big dose of reality. For example, do
you want people to think of your shop as
“full service”? If so, you must be prepared
to back it up with all the services they will
ever want. Do you want to advertise your
product or services as the most unique
or highest quality ones available? Do not
build a whole marketing approach around
that premise if you cannot support it.
Decide exactly what it is you really have to
offer. Then you can decide how to package
it and determine what it will take to sell it.

Step 2: Identify your market.
Every business should be able to identify

a target group that constitutes its primary
market, because that is where the business
should focus the bulk of its advertising
and promotional efforts. For a gunsmith,
this means knowing your geographic limi-
tations within your area — gaining access
to available data on statistical profiles of
prospective customers — and utilizing lo-
cal organizations like chambers of com-
merce, libraries, and community colleges

Figure 7: Your training gives you the knowledge to recommend and install accessories, like a telescopic sight. These extra
accessories add up to more income and prof its.


Figure 8: Once you have a good product or service to offer, you must know how to promote it.

for relevant demographic studies. You
cannot promote your business effectively
unless you know what your market is and
where it is located.

Step 3: Decide on a marketing plan.
As a gunsmith, you must decide on a

method of operation because that will have
a great deal of influence on how, when,
and where you advertise. You must decide
if your business will operate with a high
volume/low price approach (like mass-
production bluing jobs) or a small spe-
cialized approach (like custom stockmak-
ing), which usually also dictates somewhat
higher prices. This is a crucial decision, not
only because it is dependent on the deter-
minations you have made in the first two
steps, but also because it will dictate what
you do in the next step.

Step 4: Establish an advertising budget.
Advertising is an investment. As with any

other investment, you need to make a firm
commitment if you want to see a positive

return. An advertising budget provides
you with parameters for your efforts.
Expenditures are deliberate, well thought-
out, and systematic rather than hit or miss.
Figure 9 provides some simple guidelines
for formulating an advertising budget. You
and your accountant should determine
your advertising budget when you draft
your annual business plan. If your accoun-
tant tends to shuffle numbers and arbi-
trarily cut costs, remind him or her that
your advertising budget is one expense
which must not be cut, because paying for
sufficient advertising is as important to
your business’s existence as paying the rent
and utility bills.

Step 5: Formulate an advertising plan.
This step is actually part of the budget-

ing process, but now we are talking about
specific, long-term planning — just exactly
how you are going to spend that money
you allocated in step four. If you will also
be selling guns and ammo on a retail basis,
first break down your year into quarters,
selling seasons, promotional periods, or
months — whatever works for you. After


Figure 9: How much should you spend on advertising?
Reprinted from Marketing 102 article by Visualscope LLC, [email protected]

This is one of the most common questions people ask. How much money should you
spend on advertising? Some consultants will throw you a number like 8-10 percent of
revenues. Some people would say that you need to spend whatever your competitors
spend. Others will tell you that you should only spend what you can afford. There is also
another school of thought that says you should determine your goal, and set the budget
according to the goal.
No wonder why people get confused. Yes, there are lots of ways to determine your
advertising budget, and each method works better than others in different types of
industries, and different sizes of companies. For service businesses with annual
revenues of $200,000 to $5,000,000, the method that works the best is 1-5 percent of
revenues. You should spend 1 to 5 percent of your revenues on advertising.
This number is lower than what others might tell you, which is often times 8-10 percent
of revenues. Why do we tell you to only spend 1-5 percent of revenues on advertising?
Because there are other ways to market your business, and advertising is only one
way to do it. You might need to re-design your web site to keep up with the times.
You might need to create a referral contest to reward the customers that give you the
most referrals. You might offer to treat every employee to dinner if customers rate you
an average of 90 percent or above on your customer satisfaction survey. All these
marketing activities require money, and they are in addition to your advertising budget.
That’s why we only tell you to spend 1-5 percent of your revenues on advertising. This
leads to the question…When should you spend only 1 percent, and when should you
spend 5 percent? Here’s the answer. If you want slow, steady growth, spend 1 percent
of your revenues on advertising. If you want fast, steady growth, spend 5 percent of
your revenues on advertising. None of these will make your company grow too fast.
Your growth should be steady whether you spend 1 percent or 5 percent on advertising.
So it comes down to how aggressive you want to be. If you want your company to
experience fast, steady growth, put 5 percent of your revenues into advertising. If your
goal is slow and steady growth, 1 percent of revenues would be enough.
There is something you need to watch out for, however. Just because you’ve spent
1-5 percent of your revenues into advertising does not necessarily mean that you’ve
done a good job at advertising. You have to direct the money into effective advertising
programs! There are some business owners that look at their advertising budget and
say, “Hey! I’ve spent 5 percent of my revenues on advertising. That means I am doing
a good job!” Well, not necessarily. Are they spending 5 percent of their revenues into
effective advertising, or are they just wasting this money?


Figure 10: A small inexpensive classif ied ad in a local
newspaper will often bring in business.

Figure 11: If an inexpensive ad pays off, you might
want to try a display ad or online advertising.

setting aside at least 8-10 percent of your
advertising budget as a contingency fund
to be used to pay for unplanned promo-
tions or special advertising opportunities,
divide the other 90 percent among those
several periods. The distribution might be
equal or unequal, depending on how you
prioritized those time periods. Next, list all
the major sales, special events, and ongo-
ing promotions you plan to conduct during
each of those periods, and allocate a por-
tion of your funds to each.

Eventually, you will need to be even more spe-
cific by deciding how much money to allocate
to each medium you will use to promote each
individual sale or promotion. But, so you do not
get too confused with all those numbers and so
you can keep your planning more responsive to
current needs, make those final decisions and
allocations one period at a time, either by the
quarter, the season, the month, etc. The man-
agement of your budget will then be more ef-
ficient, and the results of your advertising will
be much more dramatic.
If you start out part-time, you may want to try a
classified ad like the one shown in Figure 10. As
you business picks up, you can move to a display
ad or online ad like the one shown in Figure 11.

You can have a good knowledge of every type
of gun on the market, know how to recommend
the correct loads for game or target, and know
how to install sights, slings, and other accesso-
ries, but if you cannot close the deal, all your
knowledge will not do you much good.
You will find that each customer that comes
into your shop is different. Learn to recognize
the right moment to say “Will this be cash or
charge?” or “May I wrap this for you?” or what-
ever it takes to get the sale. However, remember
never to make promises that you cannot or will
not keep. If you are honest in your dealings and
give good service at a fair price, you are well
on your to way to becoming a success at selling
new guns.


Buying Your Stock
When we talk about “buying your stock,” we
are not talking about a gunstock, nor about spe-
cial orders. We are referring to the merchandise
you will carry in stock in your gun shop. You
should be very selective in ordering items on
speculation — hoping that they will eventually
sell. Many firms have gone bankrupt because
they stocked merchandise that would not sell.
Consequently, they were forced by the courts to
sell everything at public auction — usually at a
great loss.
Before spending any money on merchandise to
sell in your gun shop, do your homework. Visit
other gun shops, sporting goods stores, and de-
partment stores selling firearms in your area.
See what items these stores carry in stock. Also
try to determine what is actually selling. If you
can stay in a store for a while, you can learn by
watching the customers’ reactions to guns of-
fered, and ultimately, exactly what the custom-
ers buy.
Another way is to take mental notes of what other
stores are carrying in stock. Then go back a week
or two later to see if the same items are there.

Many gunsmiths like the freedom of paying
cash for everything. This way they are not under
as much pressure during times when business is
slack. However, most people who are expand-
ing their business will eventually have to use
credit to purchase items. Many firearms suppli-
ers will give credit to approved individuals with
no interest or carrying charges for a period of
30 days; some even longer. Consequently, you
can use this to your advantage; that is, you are
not required to borrow money from a lending
institution at a high interest rate to stock your
business. However, in doing so, always proceed

with caution. If you buy too many items on cred-
it (more than you can sell within a reasonable
time) you can get into financial trouble.
One of the best ways to stock your business
without investing too much money is to offer
to sell used firearms on consignment. A classi-
fied ad in a local newspaper could bring in doz-
ens of firearms. Selling on consignment means
that an individual gives you a gun or guns to
sell for him or her. You are responsible for the
guns during the time they are in your posses-
sion. You then try to sell the guns for the indi-
vidual at an agreed-upon price. When the guns
are sold, you pay the owner of the gun what you
received, less a predetermined amount for your
services, which is usually about 15 percent. In
other words, the gun’s owner is paying you a
commission for selling the gun. You are respon-
sible for keeping the guns in good condition and
protecting them from fire and theft. In return
for your services, you get a commission of 15
percent for selling them.
Obtaining guns on consignment may not be as
easy as it sounds. Before most people are going
to trust you with their guns, you must first build
up a good reputation. However, once you have
built a good reputation, taking guns on consign-
ment is a good way to stock your place of busi-
ness with a minimum amount of cash outlay.

Firearm suppliers, like some gun dealers and
gunsmiths, do not always deliver when they
promise. You will want to find a firearm sup-
plier who gives you good service and competi-
tive prices. This may require a certain amount
of research.
You can find a jobber or supplier of firearms and
related accessories by contacting the manufac-
turer of the product you desire. They will give
you the name, address, and phone number of
the closest supplier to you. However, the clos-
est supplier may not always be the best. Check


Figure 12: Check the internet or various shooting publications for a list of f irearm suppliers.

in shooting publications like Shotgun News, Gun
List, Shooting Industry, etc. for various jobbers
and suppliers. Many have ads in these publica-
tions along with prices of various products. This
is one way to cheaply compare prices without
running up your phone bill (Figure 12).
You will then want to try some of these suppli-
ers to see how they deliver. Eventually, you will
find one or two suppliers who meet with your
approval, and you will not have to worry about
others unless you need to order a special product
that your normal supplier does not carry.

Here are a few things to avoid when choosing a
gun supplier:
• Beware of suppliers who give your com-

petitors better prices than they give you.
Sometimes a supplier has a favorite gun
shop for one reason or another, and will
give this gun shop an additional 10-15
percent discount. It will be hard for you

to compete if you must pay more for your

• Beware of broken promises. If you order
something for a customer, and the supplier
gives you a shipping date, your customer
is going to expect the item a few days af-
ter this date. If the ordered item is very
late, your customer may purchase it from
another dealer and never come back into
your shop. There are times when shipment
delays are unavoidable. However, if delays
happen frequently, it would be a good idea
to look for another distributor.

When buying guns and related items for resale,
always watch for special sales. Most distribu-
tors have such sales one or two times a year, and
if you have the money to invest, you can often
save a lot by purchasing items you need during
these times.


Imported Firearms 181
Winchester Imports 185
Imports After World War II 185
The Ak47 And Other Military Rifles 187

American Firearm Importers 189
Foreign Firearm Manufacturers 190

Import Requirements For Firearms & Ammunition 191
The Import Process 192
Licensing 195


hapter 8

– Im
porting Firearm




In most cases, a gunsmith who holds a Federal
Firearms License (FFL) can import a firearm
or two each year without obtaining an import-
er’s license; that is, if the firearm is for his or
her own use, or if the firearm remains in the
gunsmith’s possession for a period of one year
or longer before it is sold to another person.
However, if you are engaged in the business of
importing firearms and ammunition, you must
obtain an importer’s license.
The Bureau of Alcohol, Tobacco, and Firearms
(ATF) defines someone “engaged in the busi-
ness” as “a person who devotes time, attention,
and labor to importing firearms and/or ammu-
nition as a regular course of trade or business
with the principal objective of livelihood and
profit through the sale or distribution of the
firearms imported.”

Swiss-made Hämmerli 280 pistol.


The average gunsmith has little need for an im-
porter’s license, but some gunsmiths have made
large profits from importing foreign firearms
and parts for resale in the United States. In fact,
some have made millions of dollars from im-
porting alone.
This lesson will give you an overview of the fire-
arm import business, the regulations, and some
ways to get started. Finally, this lesson reveals
some of the possible sources where you can ob-
tain foreign firearms direct from their manu-
facturers or distributors.
Even if you are not interested in importing
firearms at this time, knowing how it is done
will put you in a better position to deal with
American importers of foreign firearms.


The Import Business
One of the first, and certainly the largest, dealers
in imported and exported firearms in the United
States was Francis Bannerman Sons, once lo-
cated in New York City. For over 100 years this
firm specialized in buying and selling firearms
and related items in every country in the world.
The following paragraphs give a brief history of
this firm.
Francis Bannerman VI was born in Dundee,
Scotland, in 1851, and came with his parents
to the United States in 1854. They located in
Brooklyn, New York, where Frank attended
public schools until he was 10 years old. It was
then that his father, Frank Bannerman V, joined
the Union army, and young Frank had to leave
school and get a job to help provide for the
younger members of the family.
After the Civil War, the Bannermans started a
business by attending auction sales, where large
quantities of military goods were offered for sale
by the U.S. government. Usually, old guns and
swords were purchased for their value in metal.
Sword handles, usually of brass, weighed about 3/4
lb. The steel blade and scabbard weighed about
3 lb. Old muskets would net about 7 lb. of iron.
Buyers could always find a market for old metal
from broken swords and guns. This destruction
of old military arms accounts for the present scar-
city of these weapons. The Bannermans bought
military arms at auction and then repaired the
guns for use — a practice that was unheard of
until they entered into the business.
In 1872, when rope became scarce in the United
States, Frank Bannerman traveled to Europe
and bought large amounts of rope for export to
New York. This started an import/export busi-
ness that would exist for more than 100 years.

The Bannerman catalog, published in the late
1800s, contained a wide assortment of military
weapons and related equipment, as shown in
Figure 1. This catalog induced many to start
collecting military weapons.
At the close of the Spanish-American War,
Bannerman purchased over 90 percent of the
captured guns, ammunition, and equipment,
making it necessary to obtain storage space for
the millions of cartridges. Bannerman bought
Polopel Island in the Hudson River for this
purpose and built harbors and storehouses pat-
terned after the baronial castles of Scotland. He
also made the island his summer home.
The Bannermans’ collection of military arms
and ammunition grew until, at the outbreak
of World War I, Francis Bannerman Sons was
able to arm Britain with a supply of arms and
ammunition in only seven days. The number of
arms furnished would take manufacturers more
than a year to produce!
Other importers/exporters of the period in-
cluded Godfrey, Schoverling, Daly and
Gales, Stokes Kirk and Drefus Brothers of
Philadelphia, Schuyler Harley and Graham of
New York, and others.
All of the above dealers were involved mostly in
surplus military goods, never new firearms.

The terms foreign or imported, when applied
to sporting firearms, mean different things to
different shooters. To some shooters, a foreign
firearm is the ultimate firearm; to others, it is
just junk. While much research has been done
on foreign firearms since World War II, the
average shooter is not an authority on foreign
guns. Most people do not even know how to
distinguish the counterfeit guns from the really
superior foreign firearms. True appreciation of
foreign firearms can only come when one knows


Figure 1: Sample page from a Francis Bannerman & Sons catalog. This catalog induced many to start collecting military
weapons in the last century. The practice continues today.


Figure 2: The Hammerli name has been a leading one
in the f ield of match shooting. Match pistols are still
imported to some extent to the United States.

the history, background, tradition, psychology,
working conditions, methods of manufacture,
and equipment that are built into each gun.
While the Chinese were probably the first users
of firearms, their inventive genius along these
lines seems to have deteriorated 1,000 years
ago. In all of Asia, only Japan produced sporting
weapons before World War II.
In the twentieth century, sporting arms have
been produced in notable quantities only in
America and Germany. While English guns
have an enviable reputation and sell at fantas-
tic prices, they are not produced in large num-
bers — usually only 300 guns a year. England
produces only a few thousand ordinary- quali-
ty firearms annually. The manufacturer of fire-
arms in England is limited almost exclusively
to Birmingham and London.
Belgium is famous for its vast number of small
gunmakers, who produce everything from the
guns considered to be junk to guns of exceptional
quality. Liege, Belgium, is the site of the world-
famous Fabrique Nationale, usually referred to
as F.N. Prior to World War I, F.N. manufactured
Mauser actions for the Belgian army. After the
factory in Germany (where the original Mauser
was made) closed, the Liege factory was the only
factory outside of the Iron Curtain that pro-
duced Mauser military actions commercially.

French manufacture of sporting guns has always
been limited. Therefore, there are few, if any,
outstanding French sporting firearms. Their
production is almost exclusively for home and
colonial consumption.
Italy has for many years produced both sport-
ing shotguns and rifles, and the quality is quite
good. Recently, several new semi-automatics
have been developed, but at a price far beyond
their value. However, this development is in-
teresting since Europeans have never favored
pump or semi- automatic shotguns, considering
them unsporting.
Switzerland is a country with few large arms fac-
tories. One of these is the Swiss Federal Guild
Factory for the manufacture of Switzerland’s
military weapons. The factory does not sell fire-
arms commercially, but it does produce a fine
military rifle and, until a couple of decades or
so ago, produced the Luger pistol for the Swiss
Army. The largest commercial arms factory in
Switzerland is the Hammerli factory, which is
known for its superb match rifles and handguns,
like the one shown in Figure 2, which often take
first place in international matches. The use of
magazine rifles for hunting in Switzerland is
forbidden, so very few magazine rifles are pro-
duced. Shotguns are made in small quantities,
but because of the exceedingly small quanti-
ties which imply practically 100 percent hand
work, prices on Swiss guns are completely
The Basque Coast of Spain, on the Bay of
Biscay, is the home of the much-maligned
Spanish arms industry. For a long time, the
term “Spanish Pistol” implied a crudely manu-
factured pistol of simple blowback principle,
made of poor castings and carelessly assembled.
Unfortunately, this reputation was justified in
most cases by the arms exported to the United
States. It is amazing that these pistols func-
tioned at all.
At the close of the Spanish Civil War, General
Franco decided that three pistol factories would
be sufficient for Spanish requirements. Today,


Figure 4: The Mannlicher-Schoenauer has been a popular sporting rifle from Europe since around the turn of the century.
This f irearm ranks among the highest quality made, and has a price tag to reflect this.

Figure 3: The Zephyr shotgun, imported by Stoeger from
1930 to 1972, was one of the better Spanish shotguns.
Photo from

there are only three manufacturers of pistols in
Spain, all of whom produce fine pistols, several
of interesting and novel design. All these pistols
are made from forgings carefully machined,
well finished, and carefully tested so that today’s
Spanish pistols rank among the best. Spain
produces a varied line of shotguns similar to
Belgian shotguns (Figure 3). Some of the over-
and-under guns produced in Spain are compa-
rable to the best pre-war German guns of this
type, but the prices for these fine pieces are far
too high to make them of any interest on the
American market.
It’s interesting to note that the new German
shotguns and combination guns (drillings, etc.)
are of superior quality and better perhaps than
those of pre-war days, with very sharp and ex-
acting proofs.

The countries mentioned above represent the
only ones producing sporting arms in any no-
table quantity. Sporting arms are turned out in
quantity in Bren in Czechoslovakia, a part of
the famous Skoda Works with particular em-
phasis on Mauser action rifles. We have little
information on Russian firearms, but what in-
formation we have indicates that some rather
crude single- and double-barrel shotguns are
being produced for farm use.
Finally we come to Austria. After World War II,
the world famous Steyr factory was authorized
to recommence manufacture, on a limited scale,
of their Mannlicher-Schoenauer sporting rifle,
shown in Figure 4. The restrictions on Austria
have been somewhat relaxed in the matter of
shotgun production, and the town of Ferlach
is producing small quantities of fine shotguns.
Ferlach is of particular interest since it is the site
of the only school in the world for gun engrav-
ers. Some of the greatest masterpieces of gun
engraving are produced here.
It’s interesting to note that the various arms
centers of Europe are near iron- and coal-pro-
ducing areas, and that the art of gun making
has been handed down through generations
as a family tradition. In Europe, to become a
gunsmith, you must first be an apprentice for
several years. The first year of apprenticeship
is spent exclusively in learning how to handle a
rifle. After this, you must have six or seven years
more experience, pass various proficiency tests,
and build a gun by hand before you may call
yourself a master gunsmith. Unfortunately, little
such training opportunity exists in America. For


an above-average gun at a popular price, noth-
ing can compete with America’s fine machine
production, but where the finest custom work is
demanded and price is no object, the master-
pieces of certain European master gun makers
cannot be excelled.

The name Winchester is as American as base-
ball and apple pie, but even Winchester was in
the import business at one time.
In 1878, E G. Sanford, an agent of Winchester,
was sent on a business trip to Birmingham,
England. While there, he received instruc-
tions from the company to purchase some of
the cheaper grades of English double-barrel
shotguns for shipment to Winchester’s New
York City office because there was a shortage
of shotguns in the New York area. At that time
Winchester had no facilities for manufacturing
shotguns. Winchester believed that considerable
additional business could be obtained by the im-
portation and sale of English shotguns.
Sanford purchased the arms from Messrs. W.
C. McEntree & Company, Richard Rodman,
C. G. Bonehill, and W. C. Scott & Sons. The
English guns sold so rapidly in New York that
Winchester decided to purchase more of the
better grades of English manufacture, to be
marked with the Winchester name. This new
line, first announced on a loose-leaf insert in
the Winchester catalog of 1879, consisted of
Winchester double-barrel, breechloading shot-
guns in the following five grades:

• Winchester Match Gun

• Winchester Class A

• Winchester Class B

• Winchester Class C

• Winchester Class D

In 1880, Winchester announced further details
and prices of this new line. The Winchester
Match Gun and Classes A, B, and C were all
furnished in 10 and 12 bore with either 30-inch
or 32-inch laminated steel barrels. The Class
D guns were furnished in the same gauges and
barrel lengths, but were listed as having English
twist barrels (the same as Damascus steel).
These guns were sold by Winchester until 1884.

Shortly after World War II ended, millions of
foreign firearms — both military and sporting
— were made available. The majority of military
weapons used by opposing countries were confis-
cated. Some were destroyed, but many were sold
at auctions to enterprising American dealers.
Most of these weapons were purchased as junk,
for as little as 10 cents a pound! The main pur-
pose of these government auctions was to enable
the American people to obtain relics of the War.
However, gunsmiths customized thousands of
these rifles for hunters. These rifles also provided
the gunsmiths with junk guns to practice on.
It was common to see advertisements in shoot-
ing publications offering many of these war rel-
ics at $5 or $6 each. Refer to Figure 5. Many
firms started making millions of dollars by im-
porting firearms. Most continued until the Gun
Control Act of 1968, when mail order ship-
ments of firearms to non-licensees were prohib-
ited. At that time, hundreds of these importers
went out of business. The few that remained
— Numrich Arms, Ye Old Hunter Lodge, and
others — struggled to stay in business, selling
only gun parts and not the entire firearm. This
practice continues today.


Figure 5: Hundreds of ads appeared in shooting publications during the 1950s and early 1960s. These importers made
millions of dollars on “junk guns.”


During and after the Vietnam War, paramili-
tary weapons gained popularity among collec-
tors and firearm enthusiasts. Consequently, Colt
came out with the AR-15 rifle, and dozens of
other manufacturers followed suit. H & K also
produced a host of semi-automatic rifles that
resembled the fully automatic weapons used by
the military. These weapons sold well, bring-
ing in a lot of money for the manufacturers.
However, eventually, these weapons fell into the
hands of the wrong people. Consequently, laws
were passed limiting the sale of such weapons,
and it is doubtful if any will reach high produc-
tion in the near future.
In the meantime, since the AK47 rifle was used
by communist troops in Vietnam, a semi-auto-
matic version of this rifle hit the United States
marketplace— most of them coming from
China. For a few years, the market was boom-
ing. Everyone wanted an AK47 rifle for their
collection. Again, restrictions have been intro-
duced to reduce the sale of such weapons, so im-
porting this type of weapon would probably not
be profitable at this time.




Figure 6: Bretton & Gaucher Models G9 & G12, just a few of the f irearms listed on their website.

Importing Firearms
There are numerous American firms that im-
port foreign firearms every year. For example,
Stoeger Industries (the publishers of the world
famous Shooter’s Bible) imports Sako rifles,
Llama handguns, and others. Precision Imports,
Inc. imports the famous Mauser sporting rifles.
William L. Moore & Co. imports Barbi, Ferib,
and Piotti shotguns.
Generally speaking, American manufacturers
prefer to mass-produce firearms. Some people
believe that firearms produced in these condi-
tions are of a lower quality than some firearms
produced in Europe, where much hand work is
still performed on firearms, allowing the manu-
facturers to produce higher- grade firearms in
limited quantities. Consequently, the market for
some higher-grade foreign firearms in America
is good. They do not sell quite as well as their
American counterparts, but enough sell to make
the practice profitable. In fact, if these import-
ers could get around the high liability insurance
rates, most would outsell any of the American
manufacturers, mainly because of the cheaper
labor and materials abroad.
However, all importers face a big problem —
shipping the firearms to the United States.

When surface shipping (by ship) is used, the
rates are relatively reasonable, and foreign
firearms are usually sold at a reduced price.
However, recently, importers have discovered
that many firearms are stolen when sent by ship.
Today, almost all foreign firearms are shipped by
air, and this accounts, in part, for the high price
of foreign firearms.
Another factor that increases the price of for-
eign firearms is the duty, or tax, applied to such
items. Excise tax adds 10 percent (handguns) or
11 percent (other firearms or ammunition) to
the price of all firearms, whether they are im-
ported or manufactured domestically. In some
countries, the duty can be as high as 40 percent
of the firearm’s value. In other words, a $100
shotgun could cost the importer nearly double
by the time it got to the United States. The im-
porter has to make a profit to stay in business,
so he or she marks the shotgun up at least 25
percent. By the time it goes through distributors
and dealers, this $100 shotgun might be sold to
the consumer for as much as $500.

At the end of this section, we provide a list of
American importers who handle the majority
of foreign firearms available in America. You
should contact each of these importers and


Figure 7: ATF Guidebook contains useful information for anyone interested in importation of f irearms.

request their catalogs, service manuals, and any
other pertinent information available. Most of
the catalogs will be available free of charge, but
you may have to pay for the service manuals.
Therefore, ask for a price before ordering the
service manuals. These manuals are invaluable
to the gunsmith. Most contain exploded draw-
ings of the firearms, assembly and disassembly
procedures, and a list of parts. Some will even
have detailed troubleshooting techniques. Once
you have these handy manuals on your book-
shelf, you will be able to handle any of these fire-
arms that may come into your shop for repair.

Also listed at the end of this section are various
foreign firearm manufacturers. Again, we rec-
ommend that you contact these manufacturers
for assembly/disassembly information, parts lists
for their firearms, and perhaps troubleshooting
data. In many cases, the information will be in a
foreign language, so be sure to request the infor-
mation in English, if available. Even if the in-
structions are in a foreign language and English
instructions are not available, you can gain much
information from the illustrations and charts.
Note: This information has been verif ied at time
of printing.

American Firearm Importers

Connecticut Valley Arms Co.
1685 Boggs Road, Suite 300
Duluth, GA 30096
(770) 449-4687

Dixie Gun Works, Inc.
1412 W. Reelfoot Ave.
Union City, TN 38261
(731) 885-0561

EMF Co., Inc.
1900 E. Warner Avenue, #10
Santa Ana, CA 92705
(800) 430-1310

Eagle Imports, Inc.
1750 Brielle Ave., #B1
Ocean, NJ 07712
(732) 493-0333

Glock, Inc.
6000 Highlands Pkwy. SE
Smyrna, GA 30082
(770) 432-1202


Heckler & Koch, Inc.
5675 Transport Boulevard
Columbus, Georgia 31907
(706) 568-1906

Krieghoff International, Inc.
7528 Easton Road
Ottsville, PA 18942
(610) 847-5173

Weatherby, Inc.
1605 Commerce Way
Paso Robles, CA 93446
(805) 227-2600

Foreign Firearm Manufacturers

Bretton & Gaucher
19, rue Victor Grignard,
Z.I. Mounreynaud,
42 St. Etienne, France

Johann Fanzoj
9170 Ferlach, Austria
Griesgasse 3

3, Derjabin Pr., Izhevsk
Udmurt Republic, 426006, Russia

18 Industrial Drive
Exeter, NH
03833-4557 (603) 772-2302

Import Regulations
The Gun Control Act of 1968 was passed “to
provide support to Federal, State and local law
enforcement officials in their fight against crime
and violence.” The problem, as perceived by
Congress, and the Senate, was that many of the
states controlled the commerce in firearms with-
in their territory, but the interstate commerce in
firearms was not controlled [18 USC 101].
The term “interstate or foreign commerce” in-
cludes commerce between any place in a state
and any place outside of that state, or within
any possession of the United States. The term
“state” includes the District of Columbia, the
Commonwealth of Puerto Rico, and the pos-
sessions of the United States (not including the
Canal Zone) [18 USC 921; 27 CFR 478.11].
The term “importer,” according to the Bureau
of Alcohol, Tobacco, and Firearms, means any
person engaged in the business of importing
or bringing firearms or ammunition into the
United States for purposes of sale or distribu-
tion; and the term “licensed importer” means
any such person licensed under the provisions
of the Gun Control Act of 1968 [18 USC 921;
27 CFR 478.11].

Under the Gun Control Act, it is illegal for any-
one other than a licensed importer to engage
in the business of importing firearms or bring-
ing into the United States or any possession
thereof any firearm or ammunition except as
provided by section 925(d) of the Gun Control
Act, which generally allows the importation of
sporting firearms and ammunition and certain
surplus military firearms classified as curios or
relics [18 USC 922(a)(1)].

Sporting Firearms and Ammunition: To
qualify for importation as a sporting firearm, a


firearm cannot be an NFA weapon, and must
be of a type “generally recognized as particularly
suitable for or readily adaptable to sporting pur-
poses” [18 USC 925(d)(3)].

Handguns: Pistols & revolvers must meet size
and safety requirements and accrue a qualifying
point value specified on ATF F 5330.5 (Form
4590), Factoring Criteria for Weapons.

Rifles and Shotguns: Firearms such as single-
shot, lever-action, bolt-action and certain semi-
automatic long guns must have generally recog-
nized sporting features.
NOTE: The ATF has determined that certain
features designed for military application are
indicative of non-sporting rifles and shotguns.
Features which are not recognized as sporting
include, but are not limited to, folding or tele-
scoping stocks, pistol grips that protrude con-
spicuously beneath the action of the weapon, a
bayonet or bayonet mount, a flash suppressor
or threaded barrel designed to accommodate a
flash suppressor, a grenade launcher and night
sights. These features as well as other infor-
mation concerning a particular firearm may
result in ATF classifying a rifle or shotgun as

Ammunition: Sporting ammunition is all am-
munition except tracer or incendiary rounds,
ammunition for destructive devices, less than le-
thal (i.e., rubber projectiles) and armor-piercing
ammunition as defined in 18 USC 921(a)(17)
and 27 CFR 478.11.

Surplus Military Firearms: A surplus military
firearm is any firearm which has ever been pos-
sessed by a regular or irregular military force.
Surplus military firearms are prohibited from
importation under 18 USC 925(d)(3). However,
18 USC 925(e) authorizes licensed importers
(FFL type 08 or 11) to import surplus military

rifles and shotguns classified as curios or rel-
ics and handguns, classified as curios or relics,
which meet the sporting criteria. In order to
qualify for importation, the firearms must be in
their original military configuration and cannot
have been sporterized. Further, under the Arms
Export Control Act (AECA), the importation
of U.S.-origin surplus military firearms is gen-
erally prohibited without retransfer authoriza-
tion from the Department of State [27 CFR

Any person engaged in the business of import-
ing firearms or ammunition for resale must be
licensed as an importer under the Gun Control
Act of 1968 and, if he is importing firearms, am-
munition, firearms parts or implements of war
(other than sporting shotguns, shotgun shells, or
shotgun parts) he must also be registered as an
importer under the Arms Export Control Act
of 1976. No permit to import such articles for
resale will be issued until the importer is prop-
erly licensed and registered. ATF Form 6 – Part
I (5330.3A) is used to obtain approval for such
importation [27 CFR 478.41; 27 CFR 478.112;
27 CFR 447.31].
1. A federal firearms licensee other than

an importer, may make an occasional
importation of sporting firearms or am-
munition (excluding surplus military) for
himself or an unlicensed person in the
licensee’s state, provided that the firearms
and ammunition are intended for per-
sonal use of the person for whom they
are imported and not for resale. ATF
Form 6 – Part I (5330.3A) is used to
obtain approval for such importation [18
USC 922(a)(1)(A); 27 CFR 478.113].


Figure 8: Originally Manufactured by the Mauser factory in 1942 for the Nazi Army.

2. A permit is not required for a firearm
or ammunition brought into the United
States or any possession thereof by any
person who can establish to the sat-
isfaction of U.S. Customs and Border
Protection (CBP) that such firearm or
ammunition was previously taken out
of the United States or any posses-
sion thereof by such person [27 CFR

3. A nonimmigrant alien entering the U.S.
temporarily needs to submit an ATF
Form 6NIA (5330.3D) (Application
and Permit for Temporary Importation
of Firearms and Ammunition by
Nonimmigrant Aliens) to temporarily
import his personally owned firearms.
He must take their firearms and unex-
pended ammunition with them when
they leave the U.S [27 CFR 478.115].

4. A permit is not required for the return
of a repaired firearm, or replacement
firearm of the same kind and type, to the
person in the United States who sent
the defective firearm out of the United
States for repair. You need to make sure
this is legal under state law before ob-
taining a replacement firearm. If it is not,
the replacement firearm would have to
be imported by a licensee.

5. An unlicensed person may obtain a per-
mit to import sporting type ammunition

(excluding tracer or incendiary) and fire-
arm parts (other than frames, receivers or
actions) without engaging the services of
a federal firearms licensee, provided that
the importation is for his personal use
and not for resale

6. A nonresident U.S. citizen returning to
the United States from a permanent resi-
dence outside of the United States may
file ATF Form 6 Part I permit applica-
tion without having to utilize the servic-
es of a federally-licensed firearms dealer.
The nonresident should include a state-
ment, either on the application form or
on an attached sheet that the firearms are
being imported for his personal use and
not for resale and that he is a nonresi-
dent U.S. citizen returning to the United
States. The firearms must accompany the
nonresident U.S. citizen on entry into
the United States, since once he is in the
United States, and has acquired residence
in a state, he may not directly import
a firearm. If he has already established
residency in a state, he would have to
engage the services of a federally licensed
firearms dealer in his state of residence to
import the sporting firearms (excluding
NFA and surplus military) for him.

7. A nonresident alien immigrating to the
United States may also file ATF Form
6 Part I permit application without


having to utilize the services of a feder-
ally licensed firearms dealer. He should
include a statement, either on the ap-
plication form or on an attached sheet
that the firearms are being imported for
his personal use and not for resale and
that he is a nonresident alien immigrat-
ing to the United States. The firearms
must accompany the alien on entry into
the United States, since once he is in the
United States, and has acquired residence
in a state, he may not directly import
a firearm. If he has already established
residency in a state, he would have to
engage the services of a federally licensed
firearms dealer in his state of residence to
import the sporting firearms (excluding
NFA and surplus military) for him.

The import process generally works by a li-
censee filing an application to import a firearm
or ammunition on ATF Form 6, Part I. This
is usually done before the firearm is actually
brought into the country. Form 6, Part I must be
approved before the firearm or ammunition can
be removed from Customs custody [27 CFR
Once Form 6 is approved, the importer com-
pletes Part I of ATF Form 6A and gives it,
along with a copy of the approved Form 6 to the
Customs & Border Protection (CBP) official
who will complete Part II of the form, docu-
menting the release from CBP custody, and will
send the form to ATF. At that time, the import-
er will also have to give the CBP official a copy
of the export license from the exporting country
authorizing the exportation of the firearm, fire-
arm barrel or ammunition from the exporting
country. If that country does not require such a
license, the importer will have to submit a certi-
fication, under penalties of perjury, to that effect
[27 CFR 478.112(c)].

Within 15 days, a licensed importer must com-
plete Part III of the form, informing the ATF
of any discrepancies in the shipment. If the se-
rial numbers of firearms were not known when
Form 6 was filed, they must be given to the ATF
at the same time Part III of Form 6A is complet-
ed. At that time, the firearms must be marked as
required by 27 CFR 478.92 [27 CFR 478.112].
ATF Form 6 Parts I, II, 6NIA & 6A Exemptions
1. No approved ATF Form 6 is required to

import any antique firearm, as that term
is defined in the GCA and the NFA [27
CFR 478.115(c)].

NOTE: You may need to supply proof to
Customs to establish that a certain f irearm,
which is not marked as being manufactured in
or before 1898, is an antique f irearm as def ined
in federal law.

2. Importations by agencies of United
States Government are exempt from
ATF’s import controls and permit re-
quirements [27 CFR 478.141(a)(1); 27
CFR 447.53.(a)(1)].

3. The person who exported/took the
goods out of the United States and is
returning them to the U.S. [27 CFR

4. Foreign military personnel on official as-
signment to the U.S. who bring firearms
or ammunition into the U.S. for their
exclusive use while on official duty in the
U.S. (excluding NFA weapons) [27 CFR

5. Official representatives of foreign gov-
ernments who are accredited to the U.S.
government or are en route to or from
other accredited countries (excluding
NFA weapons) [27 CFR 478.115(d)(3)].


6. Officials of foreign governments and
distinguished foreign visitors who have
been so designated by the Department
of State (excluding NFA weapons) [27
CFR 478.115(d)(4)].

7. Foreign law enforcement officers of
friendly foreign governments entering
the U.S. on official law enforcement
business (excluding NFA weapons) [27
CFR 478.115(d)(5)].

To engage in the business of importing firearms
or ammunition, you must first file an application
and receive a license to import from the ATF.
Remember, while other licensees can make oc-
casional importations for themselves or non-
licensees, they are for personal use only. Each
applicant must pay a fee for obtaining such a
license; a separate fee is required for each place
the applicant is to do business. The fees are as
follows [27 CFR 478.42]:
• If the applicant is an importer of de-

structive devices, ammunition for de-
structive devices, or armor-piercing am-
munition, the fee is $3,000 for 3 years.

• If the applicant is an importer of fire-
arms other than destructive devices,
ammunition for firearms other than
destructive devices or ammunition other
than armor-piercing ammunition, the fee
is $150 for 3 years.

• If the applicant is a dealer in destructive
devices or ammunition for destructive
devices, the fee is $3,000 for 3 years.

• If the applicant is a dealer dealing in
firearms other than destructive devices,
the fee is $200 for the first 3 years and
$90 for each subsequent 3-year renewal.
This is the license held by pawnbrokers
and gunsmiths who do not engage in the
business of manufacturing.

• If an applicant is qualified and has filed
the proper application and paid the pre-
scribed fee, the ATF will issue to a quali-
fied applicant the appropriate license, en-
titling the licensee to transport, ship, and
receive firearms and ammunition covered
by such license in interstate or foreign
business during the period stated in the
license [27 CFR 478.47].

The ATF shall approve or deny an application
for a license within the 60-day period beginning
on the date the properly executed application
was received [27 CFR 478.47(c)].
The ATF may, after notice and opportunity for
hearing, revoke any license issued under this
section, if the licensee has willfully violated any
provision of the Gun Control Act or any rule
or regulation in 27 CFR Part 478 [27 CFR
Each licensed importer, manufacturer, and deal-
er must maintain records of importation, pro-
duction, shipment, receipt, sale, or other dispo-
sition of firearms at his or her place of business.


The form and the length of time these records
must be kept is determined by the attorney gen-
eral [27 CFR 478.121; 18 USC 923(g)].
The ATF can conduct an inspection of your
business premises once a year without a war-
rant. They have the right to enter your business
premises and to examine your records, docu-
ments, ammunition and firearms. They must do
this during your stated business hours [27 CFR
If they have conducted an inspection less than
a year ago, the ATF can ask for your consent to
do an inspection. They do not need a warrant
to do this. You do not have to give your con-
sent. If they are asking for your consent to do
an inspection less than a year after they’ve done
one, you have the right to ask why and to use
that information to help make your decision.
It is highly recommended that you contact an
attorney, knowledgeable in firearms law and a
FFL representation, before making any decision
to consent to an inspection.
If the ATF believes that you are in violation of
the law, and they have conducted an inspec-
tion less than a year ago, they can obtain a war-
rant, from a federal magistrate, to inspect your

business during normal business hours. They
will be able, with this warrant, to enter your
business premises and to examine your records,
documents, ammunition and firearms. So be
sure that your records are accurate and up-to-
date [27 CFR 478.23].
If the ATF believes there is reasonable cause to
believe that a crime has taken place, they can
obtain a warrant from a federal magistrate to
search your business premises or anywhere else
authorized by the magistrate. The warrant will
list exactly what they’re looking for. If they use
this option, they are thinking of criminal pros-
ecution and you need to speak to your attorney
This is a simplified version of the law. You
should read and thoroughly understand the first
11 pages of ATF Publication 5300.15, Federal
Firearms Licensee Quick Reference and Best
Practices Guide, and become familiar with ATF
Publication 5300.4, Federal Firearms Regulations
Reference Guide, that come with your FFL. The
above fees may change periodically, but they are
set by law and it would require a change in the
law to change them.


Questions and
Who may ship a firearm through the mail?
A non-licensee may not transfer a firearm to a
non-licensed resident of another state. A non-
licensee may mail a shotgun or rifle to a resi-
dent of his or her own state or to a licensee in
any state. The postal service recommends that
long guns be sent by registered mail and that no
marking of any kind which would indicate the
nature of the contents be placed on the outside
of any parcel containing firearms. Handguns
are not mailable. A common or contract car-
rier must be used to ship a handgun [18 U.S.C.
1715, 922(a)(3), 922(a)(5) and 922 (a)(2)(A)].

Does an importer or manufacturer of firearms
also need a dealer’s license?
No, as long as the importer or manufacturer is
engaged in the business of dealing in firearms at
the licensed premises in the same type of fire-
arms authorized by the importer’s or manufac-
turer’s license [27 CFR 478.41(b)].

May a licensee who does not have an
importer’s license make an occasional
Yes. A licensed dealer may make an occasional
importation of a firearm for a non-licensee or
for the licensee’s personal use (not for resale).
The licensee must first submit an ATF Form
6, Part I to the ATF for approval. The licens-
ee may then present the approved Form 6 and
completed ATF Form 6A to U.S. Customs and
Border Protection. Contact the ATF, Firearms
and Explosives Imports Branch for forms, or
order them from the ATF Distribution Center
by calling (202) 648-6420 or download them
from the ATF Web page at
forms/firearms/ [27 CFR 478.113].

When preparing an import permit application
on ATF Form 6 Part I, Part II, or Form 6NIA,
do I have to report the actual barrel length and
overall length of the firearm I want to import?
Yes, the barrel length and overall length of a
firearm are required pieces of information on
an import permit application. Gun Control
Act (GCA) regulations in 27 CFR 478.112(b)
and Arms Export Control Act regulations in
27 CFR 447.42(a)(1) make this information a
mandatory part of completing the permit ap-
plication. Applications that lack this informa-
tion, provide only a range (e.g., 18-24 inches),
or that are non-specific (e.g., 18+ inches) with
respect to barrel length and overall length, will
be returned without action by the ATF for more
information from the applicant.
Barrel length and overall length are important
factors in helping the ATF determine whether
a firearm is importable, helping U.S. Customs
and Border Protection reconcile a permit to the
actual shipment during the release process at a
port of entry, and may be useful in assuring that
the correct duty is paid. In addition, the barrel
length and overall length of a firearm are deter-
mining factors in whether a firearm is subject to
the additional controls of the National Firearms
Act (NFA). A shotgun having a barrel of less
than 18 inches and an overall length of less than
26 inches and a rifle having a barrel of less than
16 inches and an overall length of less than 26
inches are classified as NFA weapons [27 CFR

How does a person qualify to import,
manufacture, or deal in NFA firearms?
The person must be licensed under the GCA
and pay the required special (occupational) tax
imposed by the NFA. After becoming licensed
under the GCA, he or she must file ATF Form
5630.7 with the appropriate tax payment in
the entire amount with the ATF. In addition,
an importer (except importers of sporting shot-
guns and shotgun ammunition) must also be


SDI is grateful to Firearms Industry Consulting Group for editing the gun law information provided in this section.

Firearms Industry Consulting Group (FICG), a division of Prince Law Off ices, P.C., is a f irearms
industry specif ic group of attorneys and consultants dedicated to the protection of the 2nd Amendment
of the U.S. Constitution in all aspects of f irearms law. Handling issues from incorporation, using
in-house generated f irearms industry specif ic documents to ensure the utmost protection of our clients,
to warning conferences, revocations and other issues with the Bureau of Alcohol, Tobacco, Firearms
and Explosives, FICG is proud to boast a national, and now even international, reputation in
the industry. In providing the best protection and advice for its clients, FICG also employs retired
ATF f irearms and explosives consultants, such as Howard Wolfe, for conducting mock compliance
checks and for consultation on other legal issues. The driving force behind FICG is Attorney Joshua
Prince, who has garnered a national reputation for protection of the 2nd Amendment and, within
Pennsylvania, Article 1, Section 21 of the PA Constitution.

registered with the ATF under the Arms Export
Control Act of 1976 [26 U.S.C. 5801, 18 U.S.C.
923, 27 CFR 447.31, 478.41 and 479.34].

Does a single special (occupational) tax
payment entitle a person or firm to import and
manufacture firearms?
No. A separate special (occupational) tax pay-
ment must be made for each of these activi-
ties. However, Class 1 (importer) and Class 2
(manufacturer) special (occupational) taxpayers
are qualified to deal in NFA firearms without
also having to pay special (occupational) tax as a
Class 3 dealer [27 CFR 479.39].

Additional Information on
Gunsmithing Business and Laws

Rev. 9/14


The information in this book is current at time of printing, since gun laws are continually
changing, it is suggested you check with the state and local government along with the ATF
to f ind current information.


National Firearms Act (NFA) – Technical 203
Registration & Taxes 204
NFA Occupational Taxes 205
National Firearms Act (NFA) Transactions 205

Gun Shows 206
Gun Raffles 206

Firearms Transaction Records 208
Identification Of Customer 208

Application Investigations 210
Compliance Investigations 211
Report of Violations 213

Recordkeeping For Licensed Dealers (18 USC 923(G)) 214
Recordkeeping For Non-Licensees 214

Unlicensed People and the Gun Control Act 215
Residency 216
Age Limits 216

Types Of Federal Firearms Licenses 217
Who Can Hold an FFL? 217
How Do I Obtain a Federal Firearms License? 217
Miscellaneous Licensing Provisions 218
Violations of The Law By Licensees 218

Sales To Out-of-State Residents 219
Sales In Part Year Residents 219
Sale Of Firearms To Licensed Collectors 219
Sales To Law Enforcement Officers 220


Straw Purchases — What Are They? 223

What Is A Prohibited Person? 225
Prohibited Persons Defined 225
Lautenberg Amendment 18 USC 922(G)(9) 226



The “National Firearms Act” (26 USC
Chapter 53) regulates machine guns, destruc-
tive devices and certain other firearms. It is part
of the Internal Revenue Code.
The NFA defines the “firearms” it covers as:

1. Shotgun with barrel(s) length of
less than 18”

2. A weapon made from a shotgun
with an overall length of less than
26” or barrel(s) less than 18” in

3. Rifle with a barrel(s) length of less
than 16”

4. A weapon made from a rifle with
an overall length of less than 26” or
barrel(s) less than 16” in length

5. Any other weapon as defined in
subsection (e)

6. Machine gun
7. Silencer
8. Destructive device

The term “any other weapon” includes:
1. “Any weapon or device capable

of being concealed on the
person from which a shot can be
discharged through the energy
of an explosive.” However, the
definition specifically excludes
pistols or revolvers with rifled

2. A pistol or revolver with a smooth
bore that can fire a fixed shotgun

Appendix 1 — National Firearms Act
3. “Weapons with combination

shotgun and rifle barrels 12” or
more, less than 18” in length from
which only a single discharge can
be made from either barrel without
manual reloading.”

Some examples of “any other weapon” are:
1. H & R Handyguns
2. Ithaca Auto-Burglar guns
3. Cane guns
4. Gadget-type firearms and “pen”

guns that fire a projectile by the
action of an explosive

The term “destructive device” includes:
1. (a). Any explosive, incendiary or

poison gas

2. Bomb
3. Grenade
4. Rocket having a propellent charge

of more than 4 oz.
5. Missile having an explosive or

incendiary charge of more than ¼ oz.
6. Mine
7. Similar device
1. (b). Any type of weapon that will or

may be readily converted to expel
a projectile by the action of an
explosive or other propellant with
barrel(s) that have a bore of more
than ½”. However, the definition
specifically excludes shotguns or
shotgun shells that the Director of
ATF finds are “generally recognized
as particularly suitable for sporting


(c). Any combination of parts designed
or intended to convert any device into
a destructive device as described in (a)
or (b).

The term “destructive device” also does NOT

1. Any device that is not designed or
re-designed as a weapon

2. Any device originally designed as
a weapon, which is redesigned for
use as a signaling, pyrotechnic, line
throwing, safety or similar device

3. Surplus ordnance sold, loaned or
given by the Secretary of the Army
under 10 USC 4684(2), 4685 or

4. Any device that the Director of
ATF finds either
• is not likely to be used as a

• is an antique
• is a rifle which the owner

intends to use solely for
sporting purposes

5. Examples of destructive devices
• Molotov Cocktails
• Mortars
• Bazookas

A “machine gun” is a firearm that fires, is de-
signed to fire, or can be readily restored to fire
more than one shot without manual reloading
by a single function of the trigger.
The term also includes:

1. The frame or receiver of any such

2. Any part, or combination of parts,
designed for use in converting a
weapon to a machine gun

3. Any combination of parts from
which a machine gun can be
assembled (If under the control of
a person)

The “Machine Gun Ban” of 1986 makes it il-
legal for a private citizen to transfer or possess
a machine gun.
Government agencies, including police depart-
ments, are exempt from this law.
Machine guns that were lawfully possessed
before the effective date of this law, May, 19,
1986, are exempt from this law.
All other NFA weapons were not effected by
the Machine Gun Ban.

1. All NFA weapons must be

registered under federal law.
2. No transfer of an NFA weapon

can take place until the application
has been approved by ATF.

3. No NFA weapon can be made by
a non-occupational taxpayer until
the application has been approved
by ATF.

4. There is a “Making Tax” of $200
imposed on the making of an NFA
weapon by a non-occupational

5. There is a $200 “Transfer Tax”
imposed on the transfer of an NFA
weapon to or from someone who is
not an NFA occupational taxpayer.

6. There is a $5 “Transfer Tax”
imposed on the transfer of an NFA
weapon classified as an “Any Other
Weapon” to or from someone
who is not an NFA occupational


• Importer of NFA Firearms

– $1000/Year
• Manufacturer of Firearms

– $1,000/Year
• Dealer of NFA Firearms – $500/

Importers and Manufacturers can pay a re-
duced rate of $500 if their total gross receipts
in the last taxable year were less than $500,000.
An NFA Occupational Taxpayer must be li-
censed under the Gun Control Act to carry out
the proposed activity.
An occupational taxpayer is exempt from trans-
fer or making taxes.
If someone liable for occupational tax establish-
es, to the satisfaction of the Director of ATF,
that his business is conducted “exclusively with,
or on behalf of the United States,” the Director
shall relieve him from payment of the tax.
A person who manufactures NFA weapons
for, or on behalf of, the United States may be
relieved from compliance with any provision of
27 CFR Part 179.

Types of NFA Transactions
Generally, NFA transactions fit into the cat-
egories we discussed previously. However, be-
cause of the tax issues, we sometimes classify
them differently.

Tax Exempt Transactions
• Transfer between NFA taxpayers

(ATF Form 3)
• Tax exempt manufacture on behalf

of gov’t agency (ATF Form 1)
• Transfer to or from a gov’t agency

(ATF Form 5)
• Transfer of an unserviceable

Firearm (ATF Form 5)
• Transfer to a lawful heir (ATF

Form 5)
• Transfer by operation of law (eg.

Court Order)(ATF Form 5)
• Manufacture by an occupational

taxpayer (ATF Form 2)
• Im portation by an occupational

taxpayer (ATF Form 9)

Taxable Transactions
1. Transfer between occupational

taxpayer and non-occupational
taxpayer (ATF Form 4)

2. Transfer between two non-occupational
taxpayers (ATF Form 4)

3. Manufacture by non-occupational
taxpayer (ATF Form 1)


Appendix 2 — Gun Shows/Raffles
A dealer can sell firearms at two types of
1. His business premises

2. A gun show or event in his home state

What is a gun show?
27 CFR 478.100(b) has a definition.
An event sponsored by any national, state or
local organization, devoted to the collection or
sporting use of firearms or by an organization
that sponsors functions devoted to the
collection or sporting use of firearms in the
• Licensees conducting business at gun

shows must keep records and conduct
business as if they were at their licensed
premises. Their records must indicate the
lo- cation of the gun show and be kept
with their other records at their premises.

• A flea market is not a gun show.

• A dealer can buy or acquire firearms

A dealer at an out-of-state gun show may only:
• Sell and deliver curio or relic firearms to

another licensee

• Display firearms

• Take orders for firearms

These orders would have to be filled from the
licensee’s premises by shipping the firearms to
a dealer in the purchaser’s home state.

A dealer can provide a firearm to be raffled by
an organization in three ways:
1. The dealer sells the gun to a

representative of the organization, who
completes Form 4473 and is checked
through NICS. The buyer must provide a
written statement, signed under penalties
of perjury, stating as follows:

• That the firearm is being acquired
for use by and will be property of the

• The name and address of the

The organization then transfers the
firearm to the winner as a non-licensee.
Obviously, this can only be used if the
organization is a non-licensee.

This is not favorable for several reasons:

• If gun is misused, it traces to the
wrong person.

• If the winner is prohibited, the
organization and dealer could be sued.

• To do this, the winner must be a
resident of the same state as the

• There are two easier, safer ways to
handle the raffle.

2. The organization pays the dealer for the
gun. The winner goes to the gun shop,
fills out form 4473, and, after a successful
NICS check is run, he is given the


• While he’s in the shop, the dealer can
sell him something else!

3. If the raffle can qualify as a gun show,
the dealer can do his paperwork, run an
NICS check and dispose of the gun to the
winner there.


Appendix 3 — Firearms Transaction Records

Forms 4473, the “heart” of the Gun Control
Filled out whenever a licensee sells a firearm to
a non-licensee.
This form is the source of information for the
NICS check.

Buyer must complete and sign Section A
before the insta-check is conducted.

• If question 11a is answered “no,”
the licensee cannot make the sale.

• If any of questions 11b to 11k is
answered “yes,” the licensee cannot
make the sale.

• If question 11l is answered “yes,”
you are dealing with a non-
immigrant alien and the “non-
immigrant alien rules” apply.

Section B –Identification of Customer
Section C- Insta-check information & NICS,
or state approval number.
Section D -Firearms purchased and seller’s
That signature must be the person who actu-
ally made the sale.

A valid government-issued photo I.D. is re-
quired. A customer must have identification
that covers all of the following:

1. Name

2. Address

3. Date of birth

4. Photograph

More than one form of identification may be
used to cover all the required information,
but all of the forms of identification must be
government-issued I.D.
If there is no government-issued photo I.D.,
there can be no disposition of a firearm to that
customer by an FFL holder.
Social Security cards are not acceptable as

Remember, a non-immigrant alien is a pro-
hibited person unless he meets one of the

1. Here for a shooting event.

2. Here for a hunting trip.

3. Has a current hunting license.

4. An official representative of
a foreign government who is
either accredited to the United
States Government or the
Government’s mission to an


international organization
having its headquarters in the
United States or is en route to or
from another country to which
that alien is accredited. This
exception only applies if the
firearm or ammunition is shipped,
transported, possessed, or received
in the representative’s official

5. An official of a foreign
government or a distinguished
foreign visitor who has been so
designated by the Department of
State. This exception only applies
if the firearm or ammunition is
shipped, transported, possessed, or
received in the official’s or visitor’s
official capacity, except if the
visitor is a private individual who
does not have an official capacity.

6. A foreign law enforcement officer
of a friendly foreign government
entering the United States on
official law enforcement business.

You will probably never see 4, 5 & 6 above. If
you do, see the instructions for Question 20C
on Form 4473. Remember, you must see docu-
mentation to accept the exemption.


Generally, ATF Industry Operations
Investigators will come to your premises for
two reasons:

1. Application Investigation
Usually done in connection with your first

application for a Federal Firearms License

2. Compliance Investigation
Done after you have been operating

The purpose of an application investigation is

1. Verify the accuracy of the

2. Determine whether the applicant
is a prohibited person

3. To ensure the applicant intends
to engage in business operations
covered by the license applied for

4. To determine the applicant has
suitable premises from which to
conduct business

5. To determine the applicant’s
ability to comply with ATF
requirements as well as state and
local laws

6. To assist the industry member in
understanding federal laws and
regulations as they relate to the

Appendix 4 — ATF Inspections
What will the investigation consist of ?
Contact by the Investigator. The investigator
will make three attempts to contact you, proba-
bly by phone. He (or she) will leave messages if
you have voicemail or if someone else answers
the phone.
If you don’t return any of the calls, the inves-
tigator will send you a certified letter, giving
you his phone number and telling you he needs
you to contact him in connection with your ap-
plication. Respond as soon as possible. If you
don’t respond, you will receive a letter telling
you that your application has been abandoned.
Good News – You will get your money back.
Bad News – You will have to re-apply to get an

Once you are in contact, the investigator will
make an appointment to meet with you at your
business premises.
What will happen during this meeting?

1. The investigator will ask you for

2. He will review the application
with you and help you correct any

3. He will determine that the
ownership of the business is what’s
stated on the application.

4. He will make sure all “responsible
people” are shown on the

5. He will make sure that:
• You’ve applied for the right

• Your proposed activity doesn’t

require any other license.


6. He will determine whether you
intend to be “engaged in business.”
Make sure you tell him you’re a
gunsmith if you are going to only be

7. He will determine whether your
• Are suitable for the activity

you’re going to conduct
• Are under your control
• Will be accessible to ATF for

future inspections
• Can be used for business

premises without violating
state or local law

8. He will review key parts of the
regulations with you.
• He will give you a paper listing

these regulations and where
you can find them in ATF

• He will have you sign his copy
of this paper.*

What will happen as a result of the
The license will be issued within 60 days of the
date ATF received the completed application.
On rare occasions, the investigator may tell
you the license cannot be issued. This can be
caused by the following reasons:

1. One of the responsible people is a
prohibited person.

2. The business premises cannot be
used because of a:

• Problem with access by ATF
• Problem with access by the

• Problem with state or local law

3. The “business” as described can’t
be licensed.

• Gun shows only
• Personal collection only (does

not apply to collector’s license)
• No intent to make profit

If this happens, you will be asked if you want to
withdraw the application. Remember:

• Withdrawal is voluntary. You
do not have to do it. The only
advantages are:

• You will get your money back

• On your next application,
you can answer no to “denial”

• You have a right to appeal any

• You can re-apply after
correcting the problem.

The purpose of a compliance investigation is

1. Make sure the business is properly

2. Determine whether the licensee is
“engaged in business.”

3. Make sure all responsible people
are listed in the licensing database.

4. Make sure all required records are
being kept accurately.

5. Make sure all firearms in inventory,
past or present, can be accounted for.


6. Determine whether business is
operating in compliance with
federal law:

• See if there are any suspicious

• To assist the industry member
in understanding federal laws
and regulations as they relate
to the industry.

What will the investigation consist of ?
Contact by the Investigator. The investigator
will probably not contact you in advance. He
will show up during the business hours you
stated on your application.

• By law, he has the right to enter
your business premises and
examine your inventory and

• If there is a problem with the time
he has arrived, let him know and
he may be able to reschedule his

What will happen during the investigation?
Depending on the size of your business, he
may be there for several days or even longer.

1. The investigator will ask you for

2. He will make sure that the
ownership of the business matches
the application.

3. He will make sure the list of
“responsible people” is still correct.

4. He will make sure you have the
proper license for the business
you’re conducting.

5. He will inventory your firearms
and compare them to your A & D

6. He will check some firearms you’ve
sold to other FFLs and look for
certified copies of their licenses.

7. He will check some firearms you’ve
sold to non-licensees and look for
Forms 4473 covering those sales.

8. He will check Forms 4473 for
proper completion and determine
whether NICS checks have been

9. He will check Forms 4473 for
suspicious purchasers:

• Possible prohibited people
• Possible straw purchasers
• Possible firearms traffickers

10. He will tell you what he found,
whether there were any problems
and will explain what corrective
action you need to take.

11. He will answer any other questions
you have and clear up anything
else in the regulations you don’t

• He will give you another paper
listing these key regulations
and where you can find them
in ATF P 5300.4.

• He will have you sign his copy
of this paper.

What will happen as a result of the
The investigator will tell you that he found
no problems and that you are operating in


You will receive a form:

• Listing the regulations violated

• Describing the violations

• Listing the corrective action to be

• Giving you a date by which the
corrections should be made

Warning Letter
• More serious problems were found.

You will receive a letter:

• Listing the regulations violated
• Describing the violations
• Warning you that failing to

correct the violations could
lead to action against your

Warning Conference
• Very serious violations have been

found. You will receive a letter
inviting you to attend a meeting
with the area supervisor.

• Each violation will be discussed.

• Corrective action will be discussed.

• You will receive a confirmation
letter stating what the problems
were and what corrective action
you agreed to.

• Read the letter and make sure
you understand it and the agreed
corrective action is correct.

Revocation of the License/Denial of the
Renewal Application

• Serious, willful violations have
been found, of types leading
directly to the criminal misuse of

• Extremely rare on a first
compliance inspection.

• A long process.

Remember, you have appeal rights.


Appendix 5 — Recordkeeping

(18 USC 923(G))
The requirements are:

1. Maintain an acquisition and
disposition record.

• A running inventory of the
licensee’s business firearms.

2. Maintain Firearms Transaction
records, Forms 4473 for sales to

3. Maintain certified copies of the
licenses of other licensees firearms
were sold to.

4. Maintain copies of multiple sales

The law requires no recordkeeping by non-
licensees for Title I Firearms. However, firearms
owners should maintain a list of their firearms,
including serial numbers, in case of theft or loss.
Registered owners of NFA weapons should
maintain copies of their registration forms.
However, even if they have misplaced the
forms, they are still the registered owners of
the NFA weapons. They can obtain duplicate
registration forms from ATF for any weapon
registered to them in the NFA database.


Appendix 6 — Firearms Transaction Records

An unlicensed person:

• Can only dispose of firearms to an
unlicensed resident of same state (if
buyer is not a prohibited person) or
to a licensee in any state.

• Can only acquire a firearm within
their home state, but may buy a
rifle or shotgun in person from a
licensee in any state if:

1. Licensee’s home state allows
sale to out-of-state resident.

2. Buyer’s home state allows
purchase out-of-state.

3. Sale complies with all federal
laws. (Form 4473 and NICS

4. Buyer is not a prohibited

An unlicensed person:
• May obtain a firearm from an

out-of-state source by having the
firearm shipped to a licensee in
his home state and acquiring the
firearm from that licensee.

• Form 4473 and insta-check
must be completed.

• May obtain ammunition from an
out-of-state source as long as he is
not a prohibited person.

• A person who is not a prohibited
person may transport a firearm

interstate for any lawful purpose

1. Firearm is unloaded

2. Firearm is in a locked trunk or
in a locked container if there is
no trunk
(Cannot be in glove
compartment or console)

3. Carrying & Possession must
be lawful in place of origin
AND destination

An unlicensed person:
• May mail a rifle or shotgun:

1. To a resident of his or her own

2. To a licensee in any state

Handguns are not mailable.

A common or contract carrier must be
used to ship a handgun:

1. To a resident of his or her own

2. To a licensee in any state

• May ship a firearm to himself or
herself in care of another person
for a lawful purpose

1. Package should be addressed
to owner

2. Nobody else should open

• If relocating out-of-state, may ship
or transport a firearm he lawfully
owns with him.


1. Must notify mover

2. Must check state and local
laws of new home state

3. Machine gun (or other NFA
type) owner must have prior
approval of ATF

• For firearms purchase purposes, a

person is a resident of the state in
which he maintains his home. A
member of the Armed Forces is a
resident of the state in which his
permanent duty station is located.
If he actually lives in a nearby state
and commutes to his duty station,
he is a resident of both states.

• A non-immigrant alien, who
has entered the U.S. with a non-
immigrant visa, is a prohibited
person unless he meets one of the

1. Here for a shooting event.

2. Here for a hunting trip.

3. Has a current hunting license.

4. An official representative of
a foreign government who is
either accredited to the United
States Government or the
Government’s mission to an
international organization
having its headquarters in the
United States or is en route
to or from another country to
which that alien is accredited.
This exception only applies if
the f irearm or ammunition is
shipped, transported, possessed,
or received in the representative’s
off icial capacity.

5. An official of a foreign
government or a distinguished
foreign visitor who has been so
designated by the Department
of State. This exception
only applies if the f irearm
or ammunition is shipped,
transported, possessed, or received
in the off icial ’s or visitor’s off icial
capacity, except if the visitor is a
private individual who does not
have an off icial capacity.

6. A foreign law enforcement
officer of a friendly foreign
government entering the
United States on official law
enforcement business.

• A person must be 18 to obtain a

rifle or shotgun from a licensee.

• A person must be 21 to obtain a
handgun from a licensee.

A parent or guardian may purchase firearms or
ammunition as a gift for a juvenile.
A juvenile can only possess a handgun with
written permission from a parent or guardian,
for limited purposes:

1. Employment

2. Ranching

3. Farming

4. Target practice

5. Hunting



• Dealer in firearms (other than
destructive devices) (Type 01)
(Includes gunsmith who does
repairs for customers)

• Pawnbroker (Type 02)
• Collector (Type 03)
• Manufacturer of ammunition (for

firearms other than destructive
devices (Type 06)

• Manufacturer of firearms (other
than destructive devices) (Type
07)(Includes gunsmith who
manufactures firearms for sale)

• Importer of firearms (other than
destructive devices) (Type 08)

• Dealer in destructive devices (Type

• Manufacturer of destructive
devices (Includes ammunition
for destructive devices and armor
piercing ammunition) (Type 10)

• Importer of destructive devices
(Includes ammunition for
destructive devices and armor
piercing ammunition) (Type 11)

Anyone who:

• Is at least 21 years old
• Is not a prohibited person
• Has not willfully violated the Gun

Control Act

Appendix 7 — Licensing Under the GCA
• Has not willfully failed to disclose

information on his application

• Has not willfully made false
statements on his application

• Has premises from which to
conduct business

In addition, the applicant must certify:
• The business to be conducted is

not prohibited by state or local law.
• Within 30 days of the approval

of the application, the business
will comply with all applicable
requirements of state and local law.

• Business will not be conducted
under the license until all
requirements of state and local law
have been met.

• The applicant has given a copy of
the application to the chief law
enforcement officer where the
premises are located.

• Secure gun storage or safety
devices will be available. *


• Submit an application (ATF
F. 7 or ATF F. 7CR) with the
appropriate fee.

• Submit photographs and
fingerprints of all responsible



• A license only covers one location;
the business premises. All sales
must be made at that location or at
a gun show in the same state.

• A licensee can purchase firearms
at any location, but must be able to
identify himself as a licensee.

• A licensed importer or
manufacturer does not need a
dealer’s license to deal, at his
premises, in the same type of
firearms he is authorized to
manufacture or import.

• A licensee who has filed a renewal
application on time can continue
to operate under his expired license
until ATF acts on his application.

All violations are not equal. All violations are
serious and must be corrected. Usually, correct-
ing the violation is easy and no further action
by ATF is required.
However, a licensee does not want to commit
any violations that contribute directly to the
criminal misuse of firearms. These violations

• A willful sale to a prohibited

• Willfully facilitating a straw

• A willful sale to an underage

• Being unable to account for a
significant number of firearms

These violations should be avoided at all costs.


Appendix 8 — Sales
Only long guns can be sold directly to an out-
of-state resident.

• The sale to an out-of-state resident
must be legal in the dealer’s home

• The purchase in another state must be
legal in the purchaser’s home state.

• The sale must comply with all federal

• The purchaser must appear in person
at the gun shop and make an over-the-
counter purchase.

Any firearm can be shipped to a dealer in
the purchaser’s home state who would then
transfer the gun to the unlicensed purchaser.

• The selling dealer must have a certified
copy of the license of the dealer he’s
shipping the firearm to.

• The selling dealer’s disposition is made
to that dealer. He will log the firearm
as acquired from the selling dealer and
dispose of it to the purchaser.

• The dealer who disposes of the gun to
the unlicensed purchaser has the pur-
chaser complete Form 4473 and does
the Insta-check.

If a person maintains homes in two states and
resides in both states for certain periods of the
year, he or she may, during the period of time

the person resides in a state, purchase a hand-
gun in that state.
Owning property in a state is not enough. The
buyer must live there.
The dealer would have to identify the customer
as discussed in that segment of the seminar.
Remember, all I.D. documents must be
There are two distinct issues:
1. Does the purchaser live in the state?

2. Does the purchaser have government-
issued identification confirming that he
lives in the state?

As most dealers should be aware, a federal
collector’s license only covers those firearms
that are classified as curios and relics. Curios
and relics are defined as:

• “Firearms which are of special interest
to collectors by reason of some quality
other than is associated with firearms
intended for sporting use or as of-
fensive or defensive weapons. To be
recognized as curios or relics, firearms
must fall within one of the following

• Firearms which were manufactured
at least 50 years prior to the current
date, but not including replicas

• Firearms which are certified by
the curator of a municipal, state
or federal museum which exhibits


firearms to be curios or relics of
museum interest; and

• Any other firearms which derive a
substantial part of their monetary
value from the fact that they are
novel, rare, bizarre or because
of their association with some
historical figure, period or event.
Proof of qualification of a particular
firearm under this category may
be established by evidence of
present value and evidence that like
firearms are not available except
as collector’s items, or that the
value of like firearms available in
ordinary commercial channels is
substantially less.”

ATF Publication 5300.11, Firearms Curios and
Relics List, consists of lists of these firearms
determined to be curios or relics from 1972 to
the present.
Therefore, a disposition to a federally licensed
collector of a curio or relic handgun does not
require an NICS check or the preparation
of a Form 4473. However, you must get and
maintain in your records a signed copy of the
collector’s license from the licensee.

A federally licensed collector acquiring any
f irearm that is not a curio or relic should be
treated as a non-licensee.

When a law enforcement officer is buying a
duty weapon, he is exempt from everything
in the Gun Control Act except for the
Lautenberg Amendment (Misdemeanor Crime
of Domestic Violence).
He can purchase a handgun from outside his
state of residence and he does not need to
complete Form 4473.
To qualify for this exemption, he needs a letter
from his commanding officer stating that the
firearm will be used in his official duty and
that the officer has not been convicted of a
misdemeanor crime of domestic violence.
Remember that this exemption only
applies to the purchase of a duty weapon.
A law enforcement officer purchasing a
personal firearm, or without a letter from his
commanding officer, is treated exactly like any
other private citizen.


Appendix 9 — Controlling Your Inventory
A key to successfully maintaining your FFL is
to control your inventory.
Why is this such an important key?
To be successful, a dealer needs to have the
proper size inventory for his business.
An FFL must know what he has in inventory
to know when to re-order firearms.
An excessive inventory is more difficult to
control and takes money out of your pocket
and converts it to firearms you won’t sell in a
reasonable period.
An inventory that is too small may cause you
not to have fire- arms customers’ wants and
could cause you to lose sales.
Here are some simple things to think about to
determine how large an inventory to maintain:

• When you order from each of your
suppliers, how long does it take to re-
ceive your order?

• How many firearms, from the supplier
you’re considering, are you likely to sell
during that period? (Remember sea-
sonal differences.)

• How often do you take a physical in-
ventory? Generally, you need to have
enough firearms on hand to last until
you can get an order filled.

In order to control your inventory, take
frequent inventories:
1. During a round of firearms inspections in

2001, ATF found that dealers who took
frequent inventories (one or more per
year) did not have inventory problems.
Dealer’s that did not take frequent inven-
tories all had inventory problems.

2. These do not have to be full inventories
at one time. For example, inventory hand-
guns one month, rifles a second, shotguns
a third. This schedule would result in four
full inventories a year.

3. The more frequent the inventories, the
easier it will be to find and correct inven-
tory errors.

What is a full inventory?
1. A comparison of each firearm on the

premises to its entry in the Acquisition &
Disposition (A & D) Record.

2. A search, physically and in sales records,
for any firearm that is supposed to be on
the premises and is not.

Correct inventory errors.
• Make corrections to the A & D

Record. Enter firearms that were not

• Correct entries as required.


Report missing firearms to ATF.
• Reference firearms to the A & D Record.

• Tag firearms in inventory:

1. By date acquired. Generally this is too
vague a method.

2. By numbering firearms when entered
into A & D Record. Workable, but
awkward with multiple books.

3. By referencing each firearm to its ex-
act location in the A & D Record, i.e.
Book 1, Page 23, Line 12. This will
allow you to f ind the f irearm quickly if
you’re using the A & D Record.


Appendix 10 — Straw Purchases
A “straw purchase” is a situation in which a
person is using a “straw purchaser”(another
person) to acquire one or more firearms from a
federal firearms licensee. This is a common way
for prohibited people to try to acquire firearms.
Specifically, the actual buyer uses the straw
purchaser to execute the Form 4473 purporting
to show that the straw purchaser is the actual
purchaser of the firearm. In some instances,
a straw purchaser is used because the actual
purchaser is prohibited from acquiring the
firearm, (ie. a convicted felon). Because of his
disability, the person uses a straw purchaser who
is not prohibited from purchasing a firearm
from the licensee. In other instances, neither
the straw purchaser nor the actual purchaser is
prohibited from acquiring the firearm.
In both instances, the straw purchaser violates
federal law by making false statements on
Form 4473 to the licensee with respect to the
identity of the actual purchaser of the firearm,
as well as the actual purchaser’s residence
address and date of birth. The actual purchaser
has unlawfully caused the making of the false
statements and may be a prohibited person in
possession of a firearm after the sale is made.
A licensee selling a firearm under these
circumstances also violates federal law if the
licensee is aware of the false statements on
the Form 4473. He has falsified his records
concerning the identity of the true purchaser
of the firearm, and has sold a firearm to the
true purchaser without having that person
fill out ATF Form 4473 and without having
an Insta-check (NICS) done on that person.
He also may have disposed of a firearm to a
prohibited person. It does not matter whether
the straw purchaser and the actual purchaser
are both residents of the state in which the

licensee’s business premises are located or
whether neither of them is a prohibited person.
Outside of a legitimate gift situation, any time
one person is purchasing a firearm meant for
another person, they are violating federal law.
Remember, a straw purchase is a common way
that criminals acquire firearms.
What is an Insta-check worth if the person
being checked is not the real purchaser of the
firearm? The answer is “nothing.” A check of
the wrong person is worthless.
Nobody should ever knowingly participate in a
straw purchase for three reasons:
1. Straw purchases help criminals commit

firearms crimes, which can harm innocent

2. Knowingly participating in a straw pur-
chase is a crime, which can cost a licensee
his firearms license and any participant
his own firearms rights.

3. Participating in a straw purchase helps
those people who want to portray the fire-
arms business as something bad and put
additional restrictions on the business.

Someone trying to make a straw purchase
will usually not tell the seller what they’re
doing, but there will often be signs of what’s
occurring. If a seller is alert, he may be able to
recognize these signs and stop the illegal sale
from occurring.
We recommend a licensed dealer follow
three simple rules to try to recognize a straw
purchase as it’s occurring. While these rules
were written for licensed dealers, they have
some application to an unlicensed seller.

Know your Customer. Discuss the
purchase and the purpose with the
customer. A customer who’s buying a
firearm suited to the purpose he’s buying


it for is likely to be a happy, and a repeat,
customer. A straw purchaser, who’s
buying a firearm for someone else may
have trouble with these type of questions.
You have a right to ask questions. A
firearms dealer is in a high-risk business.
Any seller has a right to satisfy himself
that the sale he’s being asked to make
is legal and above board. As a seller,
you have a right, and an obligation to
yourself, to determine that the person
asking you to sell him a firearm is the
actual purchaser of the firearm.
You have a right to refuse to make
a sale. If you believe that the person
you’re dealing with is not purchasing the
firearm for himself, it is illegal to make
the sale.

For a dealer, the most obvious sign that a straw
purchase is occurring is question 11a on the
new ATF Form 4473. This question asks: “Are
you the actual buyer of the firearm(s) listed
on this form?” If the purchaser answers “no”
to that question, a dealer cannot sell him the
firearm. He has, by that answer, told the dealer
that he is buying the firearm for someone
else. Remember that people sometimes
misunderstand questions on forms. Remember
the second rule above. A dealer has the right to
ask questions. A dealer should ask the person
if his answer to that question is correct, that
he is not the actual buyer of the firearm. If
he confirms it, the sale should not be made.
If he wants to change the answer, the dealer
should ask some more questions. One obvious
question would be to find out why he answered
“no” to that question. His answers and his
reactions to the questions will help the dealer
decide if this is a straw purchase. If the dealer
is not satisfied that he is the actual purchaser of
the firearm, the sale should not be made.


Reducing the gun control act to one sentence:
The purpose of the Gun Control Act is to
keep firearms out of the hands of “prohibited

Under Indictment
Under indictment for “crime punishable by a
term of imprisonment exceeding one year”:
Convicted Felons

• Convicted of a “crime punishable
by a term of imprisonment
exceeding one year.”

• This means a felony with a
maximum penalty of over 1 year;

• A misdemeanor with a maximum
penalty of over 2 years.

• Does not include anti-trust, unfair
trade practices etc.

Fled state to avoid criminal prosecution
or to avoid giving testimony in a criminal

Drug Users
Current user of illegal drugs.

Dishonorable Discharge
Discharged from the Armed Forces with a dis-
honorable discharge or dismissal adjudged by a
general court martial.

Appendix 11 — Prohibited Person

Illegal Aliens
An alien who is in the U.S. illegally.

Mental Defectives
Finding by court that a person:

• Is a danger to himself or others

• Lacks the mental capacity to
manage his own affairs

Evidence can be:
• Finding of insanity in a criminal


• Found incompetent to stand trial

Renounced Citizenship
• Formal renunciation of U.S.


• Hasn’t been reversed

Restraining Order
Subject to a court order that restrains him from
harassing, stalking or threatening an intimate
partner or child of such intimate partner.

1. Issued after hearing

2. Restrains from harassing, stalking
or threatening

3. Includes a finding that he is a
credible threat; or

4. Explicitly prohibits the use,
threatened use or attempted use of
physical force


18 USC 922(G)(9)
Has been convicted of a misdemeanor crime of
domestic violence.

• Misdemeanor or maximum
penalty of less than a year in states
that do not have misdemeanors

• Involves use or attempted use of
physical force or threatened use of
a deadly weapon

• Committed by current or former
spouse, parent or guardian of the

• Must have been convicted, not just

Police officers are not exempt from this
When buying a duty weapon, the officer must
produce a letter from the commanding of-
ficer certifying the police officer has not been
convicted of a misdemeanor crime of domestic



Do you need academic writing help? Our quality writers are here 24/7, every day of the year, ready to support you! Instantly chat with a customer support representative in the chat on the bottom right corner, send us a WhatsApp message or click either of the buttons below to submit your paper instructions to the writing team.

Order a Similar Paper Order a Different Paper