Author Topic: How to structure a business that has safety liabilities  (Read 2124 times)

StartingEarly

  • Bristles
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How to structure a business that has safety liabilities
« on: May 23, 2017, 02:14:35 PM »
I am getting into ammunition resales and by the very nature of the business it opens me up to liability if I get a bad round from one of my manufacturers that blows off half of someone's face when the gun explodes from a double charge. I am planning on doing maybe 100,000 in sales the first year with a profit of about 30,000. I don't feel a sole proprietorship is in my best interest due to liability and having over 100k that is outside of the business at present. I would be doing business face to face and only within the state of Wisconsin. I will have an EIN and a merchant tax license. Any advice would be greatly appreciated, my current thoughts are S Corp but I would love to hear yours.

Thanks,

TY

CareCPA

  • Bristles
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Re: How to structure a business that has safety liabilities
« Reply #1 on: May 23, 2017, 05:54:12 PM »
In the real-estate world, there is often a debate over whether one should set up a corporate structure, or have good insurance. In your case, I would recommend both. The more layers you can put between your personal finances and the person suing you, the better. The goal is to make it not even worth the lawyer's time to pursue.
Another good idea is to shove as much of your personal finances into protected assets (i.e, I believe 401k's cannot be touched in a lawsuit. Some states protect home equity - this is one instance where it may be beneficial to pay down your mortgage instead of invest in a taxable account).
When you set up your Corp, make sure you follow all documentation requirements, and separation of finances. There is another thread that popped up recently with a good discussion on piercing the corporate veil. If I can find it again, I'll link it in here. Maybe someone will jump in and beat me to it.

StartingEarly

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Re: How to structure a business that has safety liabilities
« Reply #2 on: May 23, 2017, 09:58:34 PM »
Yeah, the accountant today recommended insurance. I kinda want to keep my business out of the limelight as much as possible. I will be renting NFA items that are HEAVILY regularted by the BATF. I must be in complete control of them at all times or risk ten years prison if Jim Davis walks off with my suppressor I handed to him or universe forbid someone walks off with the combination short barreled rifle short barreled shotgun Pulse Rifle advertising tool I'm going to have produced.

ChpBstrd

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Re: How to structure a business that has safety liabilities
« Reply #3 on: May 26, 2017, 09:18:11 AM »
I would be equally concerned about the ammo being used in a crime and traced back. E.g. think about the people who sold guns/ammo to mass shooters. Your liabilities would be:

1) Did you dot your i's and cross your t's to ensure 100% legal compliance in your operational process? Otherwise, they might hold you criminally liable.
2) Civil suits by victims/families. Essentially, roll the dice on a jury's opinion.
3) Spending years of stress and tons of lawyer money while the investigation goes on and you respond to subpoenas, get called to witness, get interrogated, arrange your own lawyer, etc.

For #1, having a lawyer review your written processes would be a good start.
For #2, liability insurance.
For #3, there's no defense against that contingency.

CareCPA

  • Bristles
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Re: How to structure a business that has safety liabilities
« Reply #4 on: May 26, 2017, 09:28:17 AM »
I don't think your risks are as high with ammo sales as they would be with actual firearms sales. Since there is no background check for ammo (at least in the states that I'm familiar with), there would be no risk of accidentally selling to the wrong person. The risks on gun sales are that the person has to pass the background check. If they don't and you still sell, then you would be liable.
With ammo sales, the person suing would have to prove that you knew they were going to use it for unlawful purposes.
Same with the OP's scenario of accident risk - I would think the liability is with the manufacturer, not reseller.

On the other hand, I am not a lawyer, and people are going to sue anyone and everyone they can find.

StartingEarly

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Re: How to structure a business that has safety liabilities
« Reply #5 on: May 28, 2017, 03:01:04 AM »
Illinois residents need a FOID card. I could run into that being a birder state