A pawn shop is a business that engages in the intake of tangible items, such as collectibles, music equipment, antiques and electronics, in exchange for short-term loans to customers.Starting a pawn shop in Arkansas requires extensive knowledge of the pawn shop industry, as well as knowledge of Arkansas regulations regarding pawn shop activities.
Obtain a Federal Employee Identification Number, or FEIN, from the Internal Revenue Service. Pawn shops are required to have a FEIN to register with the Arkansas Secretary of State. You can visit an IRS office in Arkansas or apply online to obtain an FEIN.
Register your pawn shop business with the Arkansas Secretary of State. All businesses in Arkansas, including pawn shops, must be registered before conducting business in this state. The Arkansas Secretary of State requirements for pawn shops are no different than for any other Arkansas business.
Obtain a sales tax permit from the Arkansas Department of Finance and Administration, or DFA. All Arkansas pawn shops must hold a valid sales tax permit. You can obtain a sales tax permit for your pawn shop by completing the Application for Arkansas Business permit on the DFA website and paying a $50 fee.
Construct a business plan for your Arkansas pawn shop. Your business plan should include information about the pawn shop owners and equipment you will need, such as display cases, computers, cash registers and security systems. It should also include information on how you will obtain funds to make pawn loans and sustain pawn shop operations.
Obtain startup funding from Arkansas investors and financial institutions to lease or purchase storefront space, pay for utilities, purchase security equipment, display cases and computer equipment, provide loans to customers to build inventory and pay employees.
Lease or purchase a storefront in Arkansas. Your storefront is the center of your business operations, and is where customers will come to obtain loans, repay loans to regain possession of collateral and purchase items for sale. Choose a location with substantial foot traffic -- although advertising can bring in customers, storefront visibility can draw in impulse buyers and people looking for quick cash. .
Advertise in local newspapers, on bulletin boards and through local television and radio stations. You can also advertise your new pawn shop business through online classified ads sites such as Craigslist and Arkansas Super Ads.
Plan to pay for at least one-third to one-half of your startup expenses out of your own pocket. Pawn shops are intrinsically risky business ventures, and Arkansas investors and lenders will want to see that you are willing to make a substantial financial commitment to your business.
Although businesses are generally regulated by state government entities in Arkansas, pawn shops are subject to further regulation by some Arkansas city governments. For example, pawn shops in Hot Springs must electronically provide serial numbers and other information on firearms and electronics they purchase. Check with your city's Small Business Development office to determine if you need to take additional steps to legally operate a pawn shop business.
Install an alarm system and contract with a security firm to help protect your assets. Pawn shops are particularly attractive targets for burglars, vandals and thieves. Security personnel can also help protect your employees and customers if a disgruntled customer becomes aggressive or violent.
Always ask questions of customers to determine if items they want to pawn are stolen. When in doubt, check with local police before purchasing an item. Arkansas law requires pawn shops to return stolen items to their rightful owners, and imposes fines for failure to return stolen property.