This question gets asked so often that I keep a response written up and saved on my computer. Here you go, from someone who went through it earlier this year.
Steps to getting a Federal Firearms License (FFL) at your home:
1) Check your local zoning ordinances and HOA CCR's, if any. If either document prohibits you from obtaining a business license at your residence, go no further. The ATF will not issue you an FFL.
2) Check with your homeowner's insurance to see how much it will go up if you run a firearm business out of your home. Hopefully you have a local agent who you've personally known and worked with for many years, as the flunkie on the toll-free call center phone will probably freak at your questions. You may find the increase in premium alone makes getting an FFL unviable.
3) Another question for yourself - are you comfortable filing federal and state tax returns every quarter, and state sales taxes every month? If not, add CPA services to your list of expenses.
4) If you've gotten to this point, find an attorney to help you form a S Corp, C Corp, or LLC (most folks go with an LLC). This is not the time to go with a DIY document off the internet, especially if you plan on dealing in NFA toys. Besides, being in the firearms biz, you're going to need an attorney sooner or later anyway; might as well get to know one now.
5) Once your corp is formed, obtain any necessary state and local business licenses to run a business. If you don't have these, the ATF will not issue an FFL. See #1 (and yes, they go to your county or city courthouse and check).
6) Call the ATF Distribution Center (703-455-7801) and ask for an application packet. It will include several copies of the application (no carbons unfortunately), fingerprint cards, and instructions.
Now, on to your business plan:
I'd like to start a home based business buying/selling via the internet, facilitating out of state transfers, etc. Would like this to provide 50% of my income within 2 years, 100% in 5 years and beyond, so I'm not looking to be a "kitchen table" FFL.
Actually, what you want to do is the definition of a "kitchen table" FFL. Repeat this three times: "The only way to make a small fortune in the gun business is to start with a large one."
Our first "official" year in business was last year, since the LLC formed late last year but we didn't receive our FFL until this year. Having only start-up costs and no income, last year was a killer on paper. Let's just say I didn't quit my day job, and still haven't.
This year, barring us winning a major .gov contract or manna falling from heaven, we're on track to break even or make a little $. Our biggest money-maker is on items we produce, followed by gunsmithing and repair work. Not a whole lot of income comes from sales of other manufacturers' stuff or from transfers.
Having said that, we have a very different business model than yours, as we're a manufacturer/gunsmith/service shop, and not a retailer. We do have an 01 with a storefront less than a mile from us, and he sends people looking for a gunsmith to us as he can't afford to keep one on staff. In return, he calls us if someone brings a trade-in and he can't easily evaluate its condition (some guns he knows, others not so much).
