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.
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.
Shelf Corporations are typically sold with the false promises of ‘coming with company credit’. These amounts are usually staggering and can range from $200,000 to $5,000,000, depending on how much the agent wants up-front for you to take ownership. The majority of the time, this funding is marketed as NO-PG, or not tied to your Social Security Number.
The agent selling the Shelf Corporation will want an upfront fee, which is typically a fraction of how much ‘guaranteed NO-PG credit’ you will receive with the corp. Fee’s range from $10,000 to $200,000 depending on the amount of credit promised. The agent will want his up-front payment via check, money order, or wire, and will often refuse to meet in person or in front of some legal council of yours so you can overview the proposal
It’s a story as old as time. The charlatan sales-man makes false promises upon false promises, and then when he has your cash in hand, he disappears like a ghost. You find out that his cell phone was a google-voice number or a temporary number, his address doesn’t exist, and recall that you never received any identification from him. Your corporate docs come in the mail, but there is no relationship with any bank, since the company doesn’t have an EIN.
Marketing. Many business owners purchase shelf corps (for $500/$1,500) for the ability to claim that there company has done business since year XXXX, you may find some of these examples in company slogans. In the world of sales and marketing, some business owners want to create a rich history for their business, so saying something like
“Serving the tech market since the 1970s”
Is advantageous for those that want to make this claim.
Unfortunately, that’s the best use case for a Shelf Corporation.
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