This is a simple “how-to” form a LLC to acquire and hold NFA items
As a thank you to the many good people and the wealth of useful information on this web site, this post describes how I formed a single-member limited liability company (LLC, a legal entity which is NOT a corporation) in Pennsylvania, how I file an annual tax return with PA (no payment needed, but one must file) and why I don’t have to file a federal tax return for the LLC. Total cost to me as a PA resident: $125 LLC filing fee and the cost of a postage stamp to mail the PA tax return each year. An LLC was the way for me to go as I live within the City of Philadelphia where it is not possible to get a chief law enforcement officer signature on an ATF Form 4 or Form 1.
You may prefer a trust or choose to form a LLC under the law of your state of residence. Regardless of where you form your LLC, you should not have any income tax cost, but every state will require that you have a location within that state where notices may be sent. If you are resident in that state you may use your address. If you are not, you may use another address in the state, including the address of a service company you pay to act as your agent in that state. The cost of a commercial agent for this purpose is around $100 annually and a web search will locate many of them. Some states also require an annual fee to keep your LLC active. In Delaware, home to many companies, the annual fee is $250. PA does not charge an annual fee, so even if you are resident outside PA you may choose to form a PA LLC and pay registered agent fees.
LLCs can be a tax-pass-through entity that for income tax purposes is a disregarded entity—all income flows through to my personal tax return, but because my LLC just owns NFA items there is no income earned and therefore no income tax payable. I made it a single-member LLC to keep it simple. The NFA-related rules on who may use or possess a short barrel rifle, suppressor or other NFA item relate to the LLC as owner just as they would to an individual as owner. The PA statute does not require that an LLC have an LLC or operating agreement to spell out the characteristics of the LLC—the statute provides all the rules. Because my LLC has only a single member there is no risk that I will disagree with myself! Later I might admit additional members and would then write an agreement spelling out their rights, but I don’t need an agreement with myself now. If you decide to have multiple members of your LLC, you might want to consult a lawyer depending on your business sophistication.
I used the simple LLC formation document that the Commonwealth of Pennsylvania allows you to download HERE
. Note that a PA LLC is dissolved upon the death or bankruptcy of its sole member unless you add a sentence in the certificate of organization that the LLC shall have perpetual existence. That may be desirable. I filled my form out, mailed it in and two days later the Secretary of the Commonwealth approved it and mailed my copy back to me. I picked a name for the LLC that was not in use, as I checked HERE
. (I used my dog’s name, and now it’s a nice way to remember him as he has passed.) I used my home address in PA as the registered office and struck out on the form all the inapplicable items. I have used the LLC as the manufacturer of a SBR (ATF Form 1) and the owner of some suppressors (ATF Form 4).
Because when it comes to money the arms of the Commonwealth’s government talk to each other effectively, I soon got a letter from the PA Department of Revenue welcoming me to the business community and assigning a corporate account number. Every year in January I prepare and file a PA Corporate Tax Report on Form RCT-101. You might well ask why a LLC has to pay a corporate tax, and the answer is that although no corporate income tax is payable the Capital Stock/Franchise Tax is applicable, and that gets reported on RCT-101. Don’t fret, no tax will actually be payable, but you do have to file.
The annual filing requires just a few pages, most of which you can fill out on-line, print and mail. Start with the RCT-101 which you can find HERE
. The instructions are in document REV-1200, so search for that on the PA web site--it seems to be hidden but a search for REV-1200 finds it. On page one of the RCT-101 complete the name, address and tax account number of your LLC in Step C and your information in Step G. On page two insert your book income as 0 for as many years as you have had your LLC. Insert your shareholders’ equity where requested (that’s the cash you provided for the purchase of your LLC-owned NFA items) and do the simple math required. Note that the valuation deduction is $160,000, so unless your LLC has more capital than that you will owe no capital stock tax. Pages three and four are probably blank and page five just wants some simple information in Section F. Fill in your information on page six and then print and sign on page one (not page six—that’s for a paid preparer, and why would you need that?).
You need to attach Schedule X, Rev-798, so search for that document on teh PA wb site. Complete name, tax account number, tax year dates, your name and SSN. You also need to attach Schedule L. You can it by searching for Rev-860. Put the total amount of cash you have provided to your LLC on the Other Assets, Total Assets, Member’s Capital Account and Total Liabilities and Capital lines.
Finally, attach an alternative Schedule C that you would file with your personal federal income tax if your LLC had any income. Because the LLC did not have income, you file this Schedule C only with the RCT-101. The text of the Schedule C is below, and you mail it to the address in the instructions (document Rev-1200). Currently that address is: PA DEPT OF REVENUE, NO PAYMENT, NO REFUND, PO BOX 280708, HARRISBURG, PA 17128-0708.
[name of your] LLC
Account ID XXXXXX
Tax Year Ended 12/31/20XX
Alternative Schedule C of Federal Form 1040
of the individual owning all of the stock of the taxpayer (the “Owner”)
[name] LLC is a Pennsylvania single member limited liability company disregarded for federal income tax purposes. Any income [name] LLC has will be reported on Schedule C of the federal Form 1040 of the Owner. For the tax year ended 12/31/2012 [name] LLC had no income and the Owner will not file a Schedule C.
Have fun, and good luck!
Disclaimer: Materials have been abridged from laws, court decisions and administrative rulings and should not be considered as legal opinions on specific facts or as a substitute for legal counsel. The United States Treasury Department issues Circular 230, which governs all practitioners before the Internal Revenue Service. Circular 230 requires a legend to be placed on written communications that are not otherwise comprehensive tax opinions. To ensure compliance with Treasury Department Circular 230, please note that this post is not intended or written to be used, and cannot be used, by you for the purpose of avoiding penalties that the Internal Revenue Service might seek to impose on you.