Is Your Firearms Industry Business as Strong as It Can Be?

January, 2015

   Firearms industry (“Industry”) businesses are some of the most highly regulated in the world.  Because of that, there are unique risks that affect Industry businesses.  For many Industry members, their business is the primary source of income, both for owners and the employees they care about.  For that reason, the business must be preserved and maximized.  

For the last decade, our law firm has advised Industry clients on structure, formation, governance, operations, and everything else affecting a new or re-organizing company.   We generally begin that process by looking at the business model and making customized recommendations.  Our recommendations are designed to ensure long-term viability. 

There are three general areas where we focus:  (1) business structure, (2) governance, and (3) standard operating procedures.

(1) Business Structure

   An Industry business’ structure is essentially its shelter.  If it is not strong, and not built to withstand threats, then the business is at risk.  After reviewing a client’s business model, we often recommend a new or reorganized business structure that anticipates growth and diversity and segregates and protects multiple assets (including ATF licenses) and lines of revenue.  This kind of structure insulates one asset from another and better enables a growing business to survive regulatory and political unpredictability, to be flexible, and to explore franchising, licensing, and spin-offs.

(2) Governance

   If an Industry business’ structure is the same as shelter, then its governance is essentially its emergencies and contingencies plan.  A strong business has to plan for both.  With many clients, we often recommend new or updated operating agreements, shareholder agreements, bylaws, and other items that address internal operations, including emergencies and contingencies (“governance agreements”).  It is absolutely essential that Industry governance agreements address certain issues that are unique to the Industry, including the death or disability of owners and potential issues regarding “prohibited person” owners or responsible persons.

(3) Standard Operating Procedures

   As a structure is shelter, and governance the emergencies/contingencies plan, standard operating procedures (“SOPs”) are the same as maintenance.  We all understand that our homes, vehicles, and businesses can fall apart if not properly maintained, and that it can cost much more to fix a problem that arises because of a lack of proper maintenance than it would have cost to perform proper maintenance.  We focus on SOPs that are designed to keep an Industry business compliant with Federal regulators (ATF, the U.S. State Department, etc.).  We work with Industry members to develop SOPs relating to ATF compliance, security, and workplace safety.  Not only do these SOPs reduce the risk of compliance violations, they also can reduce insurance premiums and other costs of doing business.