In this article, we’re answering “what is a shell company?”
In short, a shell company is a corporate entity that is not currently operational. Said differently, it doesn’t engage in any business activities.
That said, there are legitimate reasons why you might want a shell company, which we’ll explore below. We’ll also answer common questions and help you decide whether a shell company meets your needs or not.
This article is part of our series on business banking, including free articles that range from merchant accounts to opening a bank account for e-commerce businesses – click here to get free access now.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- What Is a Shell Company?
- Are Shell Corporations Safe?
- Who Can Acquire a Shell Corporation?
- How to Obtain a Shell Corporation
- Frequently Asked Questions
- Do You Want Help Opening a US Bank Account?
What Is a Shell Company?
A shell company is a corporate entity that is not currently operational. Certain shell companies may have been operational in the past, while others have not engaged in any business activities since registration. Shell companies are available in most jurisdictions, and they can include both private and publicly listed entities.
In most cases, a person would only purchase a shell company when they have a specific objective in mind. This may be to purchase an asset through the company, such as a property or a piece of art. Alternatively, in the case of a publicly listed company, investors may want to inject other assets and then use the entity to raise additional capital through public markets.
In other instances, shell companies are viewed as a faster route to registering a business and even opening a bank account. However, this is often a false narrative. In jurisdictions where shell companies are commonly available, company registration can usually be completed fast. And, while certain shell companies may have a bank account, these accounts are often closed after the entity resumes operating.
Are Shell Corporations Safe?
Shell corporations are safe. In fact, a shell corporation is just as safe as any other corporate structure, whether it’s a corporation that has been trading for more than ten years or a brand new LLC that was registered last week. The reason for this is that a shell corporation is (like all other companies) a legal entity.
Do Shell Corporations Get Accused of Money Laundering?
Shell corporations do have a reputation for being involved in money laundering and funding criminal activity. However, they are not the only corporate structure used by criminals. In fact, any company can be used by bad actors, whether it is a shell corporation in a foreign jurisdiction or a local LLC in a neighboring state.
Who Can Acquire a Shell Corporation?
Anyone can acquire a shell corporation. In most cases, shell corporations are purchased through a lawyer who has either assumed control of a shell corporation from a past client or registered the corporation with the intention of selling it to someone in the future. That said, an individual can also register a new company and not engage in any business activities. This would also be considered a shell corporation.
How to Obtain a Shell Corporation
To obtain a shell corporation, you will need to contact a lawyer or corporate registration agent in your desired jurisdiction. Depending on the jurisdiction you choose, there will be a wide range of different requirements to transfer ownership.
Likewise, if the shell corporation has an existing bank account, you will need to provide the bank with all onboarding documents as if you were opening a new account. In fact, in many instances, it can be easier to open a new bank account instead.
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Frequently Asked Questions
Below are three of the most common questions that we receive from people looking into what a shell company is. If you have further questions you would like answered, don’t hesitate to get in touch with us directly.
What Is the Point of a Shell Company?
The point of a shell company is to quickly obtain a corporate structure and use that structure (e.g. the shell company) for a specific purpose. This purpose can range from acquiring assets, starting a new business, injecting assets into the shell company, and much more.
Can You Obtain Personal Loans With a Sell Company?
No, you cannot obtain personal loans with a shell company unless the entity has an existing credit history. Likewise, even if the company has an existing credit history, the loan that it would be eligible for would be a business loan, not a personal loan.
Is an LLC a Shell Company?
An LLC can be a shell company if the LLC does not engage in any business activities. In fact, any entity can act as a shell company as long as it does not have operations and engage in any business activities.
What Is a Shell Company and Is It Legal?
A shell company is a corporate entity that is not currently engaged in any business activities. Sell companies are legal and tend to be purchased directly from lawyers and corporate agents in their jurisdictions of registration.
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