Overview of Investing
and Investments
A shelf corporation, also called an aged
corporation, is a corporation that has had no activity.
It was created and put on the "shelf" to age. The
corporation can then be sold to someone who would prefer
to have an aged corporation rather than a new one. It is
a business entity that has been created through a
process other than incorporation (such as a limited
liability company) and is simply called a shelf company.
There are several benefits associated with buying shelf
corporations, one of which is potential buyers now have
a company where they can have anonymous standing—your
name does not exist with the company.
Common reasons for buying a shelf corporation include:
■ Saving the time involved in taking the steps to create a new
corporation.
■
Gaining the opportunity to bid on contracts.
■
Creating an appearance of corporate longevity.
■
Access to investment capital.
■
Easier access to corporate credit.
However, these
reasons are open to criticism. Many years ago, it
would take months to properly incorporate a
business. But, now it is quite easy to do so, at
least in Australia, the United States, Canada and
Western Europe. In fact, it can now be done in as
little as a couple of hours. Most companies who sell
shelf corporations can make the exchange in as
little a two hours. You can even change the name of
the corporation as quickly as it takes to change the
title without any undesirable side effects.
One important point to be aware of regarding
shelf corporations is that a corporation might
end up "on the shelf" precisely because of a bad
business history. Therefore, it is questionable
whether a shelf corporation improves access to
capital, since creditors and investors look into a
company's history as part of due diligence.
Nevertheless, many have been able to immediately use
the company’s inherent lines of credit. A number of
companies and organizations "produce" and sell shelf
corporations, promoting the fact that the new buyer
can at the same time have a corporation with a long
history, and yet have complete control over the
establishment of the corporation's board of
directors and shareholder profile. The cost for
shelf corporations varies with how old they are.
Corporations with as little as six months of history
can sell for under a thousand dollars, where
corporations close to a hundred years of history can
sell for hundreds of thousands of dollars.
|
