Case Studies

Minimizing Licensing Requirements for Second-Hand Dealers and Gold Buying Centers

A number of clients have unique business models which focus on the receipt and resale of used goods. These companies range from traditional pawn shops, to gold buying centers, to cell phone resellers, to electronic device recyclers. Two national second-hand-oriented clients we serve face similar licensing issues. A national payday loan business recently added gold buying/reselling to their portfolio, while a kiosk-based phone recycler recently kicked off operations across the country. Both had initial business licensing tasks that were further complicated by the requisite “reporting requirements” that local law enforcement imposed on them. Both companies had aggressive revenue plans that were contingent on quick rollouts and streamlined operations.

Challenge

Companies that receive used goods and resell them have more stringent licensing requirements, but every business model has a unique dynamic which drives the company’s profitability. Further complicating the licensing issue is the ongoing reporting requirement placed on these second-hand dealers by local law enforcement. Because current codes typically apply to traditional pawn shop businesses, hybrids can be subject to uncomely licensing and reporting requirements which can diminish profitability significantly.

Second-hand dealer businesses have come to Business Licenses, LLC to answer four key questions:

“What licenses do the authorities really require me to have?”

“Does my business really fit the local description of a second-hand dealer or recycler?”

“How quickly can I get the required licenses and be up and running?”

“What is the minimum ongoing local reporting responsibility I can be saddled with?”

Typical licenses for these companies include a second-hand dealer license and a weights and measures license, in addition to the typical business licenses and tax registration required for selling goods. A licensing authority may try to impose unnecessary licensing due to their unfamiliarity with the business models. Additionally, gold buying and used goods buying/reselling is heavily regulated. Each location was required to have ongoing reporting responsibilities that were becoming onerous if not minimized. All of the second hand dealer businesses had to become aware of specific transaction reporting required by local law enforcement in an effort to monitor potential theft. Additionally, the items taken in need to be scrutinized to ensure that a fair amount is offered to the seller, and held for a specified period of time.

Each of these unusual second-hand dealers realized that they must approach the licensing process as an educated negotiation rather than simply accepting the requirements that are imposed by an uninformed licensing authority clerk. Licensing unique businesses requires an understanding of the code and a clear picture of how the business may differ from the code that is on the books.

Solution

Business Licenses, LLC began researching the licensing requirements of the two second-hand dealers by calling the applicable licensing authorities and engaging them in conversation. Additionally, the phone contacts were constructed as “advocacy” calls – seeking to explain the true nature of the various businesses and seek relief from some of the unnecessary licensing burden. Difficult jurisdictions were identified in a comprehensive research report and new rollout locations were considered when the local licensing burden became too oppressive.

Once locations were finalized, Business Licenses, LLC then contacted local law enforcement to uncover and document the periodic reporting requirements. Once again, advocacy was required to try and reduce any unreasonable requirements and reporting time frames. Clients were presented with a guide outlining reporting procedures, locations, and time frames.

Each of the second-hand dealer businesses were confident that they had the optimal locations, correct licensing, and reasonable reporting requirements, allowing them to quickly ramp up or expand their businesses and maximize revenue in the short term.

Takeaway

Second-hand dealer registration and licensing is a tricky endeavor. Business Licenses, LLC has unparalleled experience in getting the right solution for each client. A significant part of the licensing effort is knowing what questions to ask and having experience with advocacy in situations that may allow for some interpretation. The combination of this advocacy and experience results in a more forgiving and flexible business model that is easier for clients to live with. Be sure to understand the level of experience with other vendors. This is not a process that your vendor should learn at your expense.