Legally Armed: V21N9

By Teresa G. Ficaretta, Esq. & Johanna Reeves, Esq.

Practical Tips for Licensees, Firearms and Transfers Compliance

As outside regulatory counsel to federal firearms licensees (FFLs), we often review inspection reports issued by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). One of the violations we see ATF citing on a regular basis involves personal firearms commingled with business inventory and not recorded in the acquisition and disposition record. The other problem areas for licensees are transfers of business inventory to employees for personal use and transfers of firearms to contractors and other non-employees for demonstration and evaluation. This article will address the law and regulations governing these business practices and provide practical compliance tips.


The Gun Control Act of 1968 (GCA), 18 U.S.C. Chapter 44, requires persons engaging in the business of importing, manufacturing or dealing in firearms, so-called federal firearms licensees (FFLs) to keep records of firearms transactions in accordance with implementing regulations. The regulations require FFLs enter each acquisition and disposition of firearms into a permanent acquisition and disposition record (an “A&D record” or “A&D book”), also commonly referred to as a “bound book.” For firearm dispositions to non-licensees, ATF requires FFLs record the transfer on a Form 4473 “Firearm Transaction Record” and check the prospective transferee against the Federal Bureau of Investigation’s National Instant Criminal Background Check System (NICS). In addition, an FFL’s firearm transfer to a non-licensee must comply with all other requirements of federal and state law.


The law and regulations allow FFLs to maintain personal collections of firearms. Personal firearms acquired by a licensee prior to obtaining a license must be recorded as business inventory in the A&D book if the licensee intends to sell the firearms. All firearms acquired after the license is issued that are acquired under the authority of the license must be entered into the acquisition and disposition record.

Conversely, if the firearms are part of the FFL’s business inventory and are then moved into the personal collection of the principal or proprietor, there are hoops the FFL must jump through to ensure the move complies with ATF requirements. The first question is whether the license holder and the collector are the same “person,” as the answer determines whether a transfer will occur, thus triggering the Form 4473 and NICS check requirements.

In one instance, a sole proprietor may hold a license in his or her own name so that the proprietor and the licensee are one and the same. In such a case, movement of firearms from the licensee to the proprietor is not a transfer, and the Form 4473 and NICS check are not required. However, the firearm to be transferred must be recorded in the FFL’s A&D record, with the disposition specifying transfer to the proprietor’s personal collection. If the firearm so transferred is held as part of a personal collection for at least one year, the proprietor may sell it in the same manner as any other non-FFL, with no Form 4473, no NICS check, etc. Of course, the individual must still comply with the interstate controls and all other requirements of the GCA that apply to non-licensees.

If the FFL is a corporation, partnership, limited liability company or partnership (LLC or LLP) or other business entity, then the question of whether the business entity can have a “personal collection” of firearms requires a more complex analysis. Because business entities are artificial persons as opposed to natural persons, it is often more difficult to make the argument that corporations and other legal entities can create and maintain a personal collection of firearms.

First, the concept of a corporation or other business entity engaging in “personal” activities is often at odds with the reasons for which such entities commonly are formed, such as limiting the personal liability of the individuals who formed the entity. Furthermore, a business entity may be created to engage in a for-profit business. To overcome such presumptions, the entity’s formation documents should clearly establish that the business is authorized to hold a personal collection of firearms. Although it is possible these business entities may be created, at least in part, for purposes of collecting firearms, the formation documents must clearly state this purpose. If such documents are sufficient under state law, it is possible the transfer of firearms to a personal collection may be accomplished as indicated above in relation to a sole proprietor. As discussed in more detail below, a transfer of firearms by a corporate FFL to an individual employee for purposes of enhancing his or her personal collection is a “transfer” that must comply with all GCA requirements.

Before we leave the subject of personal firearms collections, it is important to address the storage of personal firearms at the licensed premises. ATF takes the position that all firearms on a licensee’s business premises are for sale and must be entered into the A&D record as inventory. To avoid this presumption, FFLs who bring personal firearms to the licensed premises or who allow employees to bring personal firearms to the premises should tag them with the name of the owner, mark them “PERSONAL FIREARMS—NOT FOR SALE” and segregate them from the business inventory. If ATF conducts a compliance inspection when untagged personal firearms are on the premises, the FFL may be cited for failure to record the firearms in the A&D record.

FFLs who allow employees to bring personal firearms to the licensed premises should adopt clear written policies on tagging and segregation from the business inventory to avoid problems with ATF.


As indicated above, we are skeptical that a corporation, limited liability partnership or other business entity may, consistent with state law, create and hold a personal firearms collection. The more likely scenario, and the one we encounter frequently, is an employee of a corporate FFL receiving firearms from the FFL for purposes of maintaining his or her personal collection. This can also occur with an officer or director of a corporate FFL using the license to acquire firearms from another FFL and then transferring the firearms to his or her personal collection. In this situation the firearm is transferred by the FFL holder to a non-FFL holder, a “transfer” which must comply with all the provisions of the GCA. Indeed, ATF made it clear in ATF Rul. 2010-1 (available on ATF’s website at www.atf.gov/firearms/docs/ruling/2010-1-temporary-assignment-firearm-ffl-unlicensed-employee/download, last visited 12/9/2016) that permanent transfers of firearms to employees that are not for business purposes of the FFL are “transfers” that must be recorded on Form 4473, accomplished with a NICS check and recorded as a disposition entry in the A&D book. A permanent transfer of a firearm for purposes of enhancing the employee’s (or officer’s or director’s) personal collection is unrelated to the FFL’s business and must be accomplished in this manner.

Temporary transfers to employees/officers/directors that are not for purposes of carrying out the FFL’s business likewise must comply with all provisions of the GCA. As an example, if an employee wishes to borrow an inventory firearm to go target shooting or hunting, the transaction must be recorded on a Form 4473, a NICS check must be conducted and the disposition recorded in the A&D book. Only if the transfer is temporary, with title remaining in the FFL, and the transfer is for purposes of carrying out the FFL’s business (e.g., display or demonstration to potential purchasers) may the FFL avoid the requirements of the GCA. Even in this situation it is a good practice to make a notation in the acquisition and disposition record indicating the date the firearm was loaned to the employee, the purpose for which loaned and the date it was returned. This procedure will avoid problems if an ATF inspection is conducted during the time period the firearm is in the custody of the employee and is not located at the licensed premises.

ATF Rul. 2010-1 also makes it clear that transfers of firearms to persons who are not bona fide employees of the FFL must comply with all provisions of the GCA. Readers may recall that a ruling issued by the Internal Revenue Service in 1969 and an industry circular issued by ATF in 1972 took the position that temporary assignments of firearms to FFL agents and representatives (including professional writers, consultants and evaluators) were not “transfers” requiring execution of a Form 4473 or otherwise complying with the requirements of the GCA. ATF Rul. 2010-1 superseded the ruling and industry circular, holding that only temporary assignments of firearms to employees for bona fide business purposes of the FFL are exempt from the Form 4473, NICS check and other requirements of the statute. The ruling notes that “bona fide business purposes” means purposes integral to the FFL’s business operations and do not include permanently assigning a firearm to a specific employee or loaning or renting a firearm to an employee for personal use.

So how can a licensee tell the difference between an employee and an agent/contractor? ATF provided guidance on this subject in a 1990 FFL Newsletter (available at www.atf.gov/file/56361/download, last visited 12/9/2016). The newsletter article, titled “Sales Agents,” states that in determining whether an employer/employee relationship exists, ATF considers whether the alleged employee is subject to the employer’s control over the manner in which the work is performed. ATF states that other factors include whether the individual is on the company payroll, whether taxes and Social Security are deducted from pay, whether the individual receives company paid benefits and other indicia of the traditional employer/employee relationship.

ATF Rul. 2010-1 also addressed the differences between an employee or contractor, stating that FFLs exert a higher level of control over employees than they have over contractors and other agents. The ruling states that, unlike contractors and agents, employees work for wages or salaries under direct supervision of the employer. The ruling further states that in the context of employees the employer controls not only the result of the employee’s work, but also the manner, training and hours in which the work will be carried out. By contrast, in contractor or non-employee agency relationships the individual has control of the manner, training and hours of performing the work and is only responsible for the result. The ruling states that because the FFL relinquishes control over a firearm by temporarily assigning it to a non-employee, the GCA requirements apply.

It is likely most FFLs know whether a particular individual is an employee or is a contractor or other agent. If the individual is on the payroll, taxes are deducted from his or her pay and company benefits are provided to the individual, the individual is likely an employee. Contractors or other agents (including writers and evaluators) are not on the payroll and generally receive payment on an hourly basis or through negotiation of a flat fee for services.

We summarize the requirements of the law for temporary and permanent transfers of firearms by FFLs to employees and contractors/agents in the table to the right...


FFLs should ensure that firearms transferred from business inventory to a personal collection are recorded in accordance with the law and regulations. It is also essential that FFLs who allow employees to bring personal firearms to work require tagging and segregation to avoid the appearance that they are inventory. FFLs need to understand the different record keeping requirements for transfers of firearms to employees for FFL business purposes, transfers to employees for personal use and transfers to contractors/agents. Failure to conduct firearms transactions in accordance with the law may result in a variety of penalties, including license revocation, license suspension, civil fines, forfeiture of firearms involved in violations of the law and/or criminal prosecution.

The information contained in this article is for general informational and educational purposes only and is not intended to be construed or used as legal advice or as legal opinion. You should not rely or act on any information contained in this article without first seeking the advice of an attorney. Receipt of this article does not establish an attorney-client relationship.


Johanna Reeves is the founding partner of the law firm Reeves & Dola, LLP in Washington, DC (www.reevesdola.com). For more than 10 years she has dedicated her practice to advising and representing U.S. companies on compliance matters arising under the federal firearms laws and U.S. export controls. Since 2011, Johanna also has served as Executive Director for the FireArms Import/Export Roundtable (F.A.I.R.) Trade Group (http://fairtradegroup.org). In 2016, Johanna was appointed by the U.S. Department of State, Bureau of Political-Military Affairs to serve on the 2016-18 Defense Trade Advisory Group (DTAG).

Teresa Ficaretta is an expert on ATF regulations under the Gun Control Act, the National Firearms Act, the Arms Export Control Act and Federal explosives laws. Before joining Reeves & Dola in 2013, Teresa served as legal counsel to ATF for 26 years, followed by two years as Deputy Assistant Director in Enforcement Programs and Services. Teresa was elected partner to Reeves & Dola in January 2016.

ATF Rul. 2010-1 also makes it clear that transfers of firearms to persons who are not bona fide employees of the FFL must comply with all provisions of the GCA.

This article first appeared in Small Arms Review V21N9 (November 2017)
and was posted online on September 22, 2017


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