Pawn shops operate by granting short-term loans in exchange for holding your personal property as collateral, or by purchasing items outright. If you're interested in owning a small business, a pawn shop can be potentially be very successful. If you live in West Virginia, it's important to understand what things you'll need in order to get your pawn shop off the ground.
Licenses and Tax Documents
Before you can open the doors to your new business, you'll need to obtain the appropriate licenses. In West Virginia, business licenses are issued through the secretary of state's office. You may register your pawn shop as a sole proprietorship, corporation, limited liability company or partnership. As of 2011, the fee to register a business in West Virginia was $30. Depending on where you plan to do business, you may need to register for a separate municipal or county business license, in addition to a state business license. The fees to obtain a local pawnbroker's license vary by location. If you plan to buy or sell firearms, you will also need to obtain a Federal Firearms License. You must also register with the state tax department and the IRS to obtain tax identification numbers.
Pawnbrokers in West Virginia are required to carry insurance to cover their stores, inventory and employees. Typically, you will need to insure your building and its fixtures, along with any inventory against fire, theft, damage and natural disasters. You should also carry workers' compensation insurance and liability insurance for your employees.
When choosing a location for your pawn shop, it's important to consider the type of traffic the area receives, and what nearby businesses may serve as your competition. You may choose to purchase a building or lease a space. Once you've selected a location, you'll need to make sure that local zoning laws permit the operation of a pawn shop in the area. You'll also need to have the space inspected by a fire marshal prior to moving in.
Before you can get started, you'll need to build up an inventory of items to offer for sale to your customers. You can find items for resale by visiting yard sales, estate sales, auction houses, online auction sites, thrift stores and consignment shops. When choosing items to stock your store with, consider their potential resale value versus their initial cost.
Starting any type of business requires some amount of startup capital. Since the primary business of a pawn shop is to extend loans to customers, you will need to have a substantial amount of cash on hand to do so. You'll also need to have money in the bank to purchase new inventory and cover your operating costs until the business gets off the ground.
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