Shelf corp funding a fairytale

A Shelf Corporation is a shell company that was formed years ago and then only brought active recently. Newly formed companies are often scrutinized when applying for loans or lines of credit by banks, so a ‘shelf corporation’ is sold to get around this by being created and then left ‘on the shelf’ for years before it used for the purpose of holding assets. In other words, it gives the bank an illusion that a seasoned business is applying for the loan.

But there’s a catch!

While lenders generally favor businesses that have been in existence for a longer period of time, do not be fooled into thinking that purchasing a Shelf Corporation will give you immediate access to capital, especially without a personal guarantee. Here are the risks you take when you purchase a Shelf Corporation.

• • 1. In MOST cases, Shelf Corporations for sale are companies that have never done business, or even filed an EIN. This makes it impossible to go through any type of underwriting where a lender requires income statements since the Shelf Corporation has never declared any income or filed a tax return.

• 2. In the event that a Shelf Corporation has done business. There could be liabilities or judgements that come up after you purchase it, and as the new owner you may inherit this liability.