When I first started reading about shelf corporations years ago, it conjured up some off-shore banking scheme or Jason Bourne-like secret account. Shelf Corps are actually much more mundane and domestic. They may be an option but do the due diligence on the seller/creator.
Shelf corporations are unique in concept but not new. Essentially, a shelf corporation has had no activity. It gets the name "shelf" because it was created then put on a 'shelf' to age or wait for the right time to use. These corporations are created and then left with no activity. The corporate entity has an advantage of being a few years old and can then be sold to a person who wishes to start up a company without going through all the hassles and processes of creating a new one.
Reasons for a shelf corporation include:
* To get easier access to corporate/business credit
* To save the time with steps to create a new corporate entity.
* To gain the opportunity for certain types of industries, situations, circumstances. For instance, some areas or industries require a company be in business for a certain length of time to be eligible or qualified for an opportunity.
* To help gain access to investors's capital.
* To create the appearance of the business's longevity. This may boost investor or consumer confidence.
When you apply for credit or when you apply for a Dun and Bradstreet
number (essential for business credit) they ask how long you (the business) have been in business. If you just started it, you have to say so or else prove it in some manner that the business has been around longer.
If you have a corporation or LLC that is already a few years old, it will be a lot easier to show D&B that your business has some history or seasoning. It doesn't always work but it can help in this case as well as when you apply to individual vendors and creditors. They all prefer a 2 year old company to a newbie.
Be aware that there are a variety of companies that offer assistance, coaching, setup, and sales of shelf corporations. There have been abuses and misuses of shelf corporations and some of the companies that sell or set them up may be dubious. Make sure that you work with a good seller/creator of shelf corporations. Buyers of shelf corporations can gain advantages with a shelf corporation but perform your due diligence to make sure what you are really buying, if it is a clean corporation with good, clean history.
At a minimum, you should get Certificates Of Good Standing from the state, Certified Articles of Incorporation from the state, the corporate kit which includes pre-printed stock certificates, corporate seal, suggested meetings minutes and one year of Registered Agent Services.
Author Resource:-
Jim Frey is a former VP of a billion dollar bank and currently a commercial loan broker, speaker, author. Jim enjoys helping entrepreneurs find alternative ways to finance projects. Get his free ebook at http://www.doughforthedream.com or listen to podcasts http://www.doughforthedream.podomatic.com
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