Are you exploring ways to set up a shell company which can help solve your financial needs?
A shell company can be an extremely useful financial tool in a variety of circumstances. In the past, a minority of these types of companies have been used by criminals to assist in their illegal activities. However, in actual fact, shell companies are completely legal and have many legitimate uses.
In this article, we will explain what exactly a shell company is, what it can be used for, and how to set one up.
Table of Contents:
A Shell Company is a company which does not conduct active business operations or hold significant assets. Shell companies are sometimes referred to by other names such as mailbox companies, phantom firms, and letter-box companies.
Shell Companies are used as legal and corporate tools to reduce taxes, temporarily store funds, access funding, and provide confidentiality.
Shell companies in comparison to a corporate entity or holding company structure do not produce or sell products and services, nor do they hire employees or generate any of their own revenue, instead they are used purely as strategic legal vehicles.
Despite what might be said in the media, shell companies are not illegal entities but are just legal structures just like many other various forms of business organizations. And like any entity, it can be used either legally or for illegal purposes.
It is easy to confuse the functions and features of Shell Companies with Holding Companies. Holding companies differ from shell companies in that they are in fact “parent” companies. This means that they hold sufficient stock in one or more other companies to maintain control over these held companies.
Like shell companies, offshore holding companies do not engage in day-to-day business operations but are used to hold assets in the form of shares in their subsidiaries.
They also have a vested interest in the operations and functioning of their subsidiaries. Shell companies, on the other hand, generally don’t own or control subsidiary companies and are instead used as legal financial tools for other purposes.
The main appeal of shell companies is that they can be formed anonymously. This means they protect the identities of their owners and allow them to take part in financial activities without revealing their names.
Although shell companies can be formed domestically, the most useful type of shell company is one which is formed offshore tax haven. Offshore shell companies give individuals and businesses the advantage of lower taxes, greater privacy, and access to different foreign markets.
A shell company is able to:
You can buy a shell company, or what is normally called an aged company or ready-made corporation through a provider that has access to companies that are still alive and in good standing.
Often times a business closes leaving the company which is aged, giving the structure better legal standing for taking on loans and opening accounts.
There are slight nuances, but it mostly comes down to terminology. The misuse of shell companies has made the term dirty, with its association linked to "money laundering" or "illegal fronts".
Just like anything, the devil is in the details. Both shell and shelf companies can be used for illegal or legal purposes, and both have legitimate uses.
Shelf companies are more synonymous with aged companies, whereas shell companies can be used as a way to create a multi-jurisdictional structure as a way of creating intermediary companies or a chain of companies for legal and structural purposes.
Shell companies are most commonly used for tax avoidance and tax reduction. This can be achieved by using them as receiving vehicles for offshore income which would otherwise be taxed at exorbitant rates in one’s own country. Instead, the shell company can be used to legitimately reduce the amount of taxes by being based in a tax haven or other offshore jurisdiction with favourable tax treatments.
There are many other beneficial uses of shell companies, including:
If your requirements match any of the above, then an offshore shell company may be the best option for you. It is advisable to seek the advice of a professional to guide you on whether a shell company, holding company, or entirely different financial vehicle is the best tool to suit your particular requirements.
Shell companies are relatively easy and simple to set up, with the following advantages:
The procedure for setting up a shell company is as follows:
Depending on the service provider you have used for setting up your shell company, you may be offered additional services and benefits. These could include the option to open a bank account, legal and/or accounting services, and other extras.
It may also be possible to purchase a shelf company for use as a shell company and has the benefit of making the process faster and allows you to take on the standing of the previous company.
It will also add credibility to your company as it would officially show that it has existed for years prior to you setting it up. This can be especially useful when trying to procure loans, setup accounts and acquire licences from financial institutions.
It is generally best to form a shell company in an offshore jurisdiction for additional protection and privacy. There are many countries to choose from.
Some of the preferred options include:
This last option might surprise you, but in fact the US is one of the best and easiest places to set up a shell company. The states of Delaware, Wyoming, and Nevada are the preferred options due to their easy incorporation laws, friendly tax policies, and strong privacy protection.
The United States is particularly attractive for foreigners who can set up their shell company as an offshore company.
Whether you should ago ahead with these steps and set up your own shell company is entirely dependent on your personal circumstances and financial requirements. That being said, these are extremely useful and convenient financial tools which can assist in a variety of situations. Furthermore, shell companies are completely legal, and can be safely used by just about anyone for legitimate purposes.
As always, it is vital to enlist the services of a professional firm that can assist you in determining your needs and help you to make them a reality.
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