Shelf Corporations – The Pros and the Cons

Consumers generally look for companies that have been in business long enough to develop a relationship with them. If you have a shelf corporation they may feel confident enough to go ahead and make a purchase.

A. Since a shelf corporation is a created business it can be sold to anyone wishing to start their own company but lack the desire to go through the process of starting one.

B. Another benefit to buying a shelf corporation is that the small business owners who are looking to bid on projects but need a number of years in the market can use a shelf corporation years in existence to their advantage. It’s like saying established since 1990, but only really beginning in 2009. The shelf company was established in 1990 so it’s true.

C. Shelf Corporations are big business for Professionals. In fact many Professionals actually maintain a career out of building and selling shelf corporations to buyers looking for a long history without the past.

D. For many shelf corporations is the way to go if you want to speed up the process of obtaining corporate credit for your business. In many cases this is going to work well for you because it shows the lender that you are an established entity instead of just another start-up, which is considered high risk.

In the eyes of the lender, it reduces the risk involved should they decide to issue you credit. This could mean the difference between getting the corporate credit your business need or being declined. It can also affect your credit limit and the amount of interest that you will pay on it.

The Cons
A. As a buyer of a shelf corporation you have to be a little clever if you are buying the company to help establish a long business history. If the credit bureaus learn of a company being under “new management” they can re-age the company to the purchase date, thus taking away the longevity. This is happening more often.

B. How honest is it to invest in a shelf corporation? Aren’t you misleading lenders, consumers, and other businesses when you use this to promote your new business? There are plenty of ethical concerns with shelf corporations that some business owners struggle with. While they are legal, many people aren’t sure that they are ethical and want no part of the process.