Dreaming of turning your passion for firearms into a business? The first, and most critical, step is navigating the world of Federal Firearms Licenses, or FFLs. While there are many types of FFLs, two stand out as the most common choices for new entrepreneurs: the Type 01 and the Type 07. Understanding the key differences between them is not just about choosing a license; it’s about defining the entire scope and potential of your business. Let’s break down what each one offers and who it’s best suited for.
The Type 01 FFL: The Dealer and Gunsmith
The Type 01 FFL is the bedrock of the retail firearms industry. It’s the license held by most local gun shops and by many home-based dealers. As the most common FFL, it’s perfect for anyone whose primary business model revolves around buying and selling firearms from established manufacturers, as well as providing repair services.
What You Can Do:
- Retail Sales: You are authorized to purchase and sell Title 1 firearms to the public. This is what you need for a standard retail storefront or a thriving online business handling transfers.
- Gunsmithing: You can perform repairs and customizations on firearms. This is a valuable service that can be a significant source of income.
Important Limitations to Consider: The main limitation of the Type 01 FFL is manufacturing. You are not permitted to manufacture firearms for sale. This isn’t just about building guns from scratch; it also includes assembling a firearm from a receiver and parts kit. This is a crucial distinction. For example, building a custom AR-15 from a stripped lower receiver and a parts kit, and then selling it, is considered manufacturing and is strictly forbidden with a Type 01 license. Additionally, you cannot sell NFA items like suppressors, short-barreled rifles (SBRs), or machine guns without obtaining a separate Class 03 SOT, and even then, you can only deal in them, not make them.
The Type 01 FFL has a $200 application fee and a $90 renewal fee every three years. It’s a great, cost-effective starting point for a simple and focused business model.
The Type 07 FFL: The Manufacturer and Innovator
If you have a bigger vision for your business, the Type 07 FFL is your ultimate tool. This license is a game-changer because it includes all the privileges of a Type 01 FFL and adds the crucial ability to manufacture firearms and ammunition. It opens the door to creating your own products and tapping into some of the most lucrative markets in the industry.
What You Can Do:
- Everything a Type 01 Can: Buy, sell, and repair firearms.
- Manufacture: You can build firearms from the ground up, assemble guns from kits for resale, and produce your own line of firearms. This is why many people get this license—the ability to create custom AR-type rifles, a hugely popular market, is a significant advantage.
- The NFA Market: The real power of the Type 07 comes when you pair it with a Class 02 SOT. With this combination, you can legally manufacture and deal in all types of NFA items, including suppressors, SBRs, short-barreled shotguns, and even machine guns. With the rising demand for suppressors and other NFA items, this capability can be a massive revenue driver for your business.
The Type 07 FFL costs $150 to apply and $150 to renew every three years. While the renewal is slightly higher than the Type 01, the expanded opportunities it provides often make this a small investment for a large return.
Ultimately, the choice comes down to your long-term business goals. Do you want to be a local gun shop that serves your community with sales and repairs? The Type 01 is your best bet. Do you want to build a brand, create a custom line of rifles, or tap into the highly profitable NFA market? The Type 07 gives you the freedom and flexibility to do all that and more.
Consider where you want your business to be in five years. Your FFL license is the foundation—make sure you build it on the right one.
