There are different types of companies in the business world. These companies are formed depending on several things. Below are some of the companies available:
- Dormant Companies: dormant companies are created for future projects. They do not conduct any financial transactions for the business.
- Government Companies: a Government company is one where the government owns more than 50% of its shares.
- Associate Companies: in associate companies, another company influences the mother company.
- Public Companies: it is a company where the members can transfer their shares to others. It has a minimum number of 7 members and an unlimited maximum number of members
- Private Companies: shareholders in private companies are not allowed to transfer shares to members of the public. It has a minimum number of 2 members and a maximum number of 200 members.
- Unlimited Companies: in this company, the members do not have any limits on their liabilities. It means that if the company was to get into debt, the member’s assets will be used to clear up the debt
- Companies limited by shares: the liabilities of the members are limited to the extent of the amount not paid by the members on their shares
These are some of the companies available. In this article, we will discuss a shell company. This article will help you know what a shell company is, the advantages of having one, and how one can start a shell company.
What is a shell company or corporation?
A shell company is a company that does not engage in any business operations. Shell companies or corporations usually have financial assets but do not carry out business activities. A shell company has the following characteristics:
- A shell company does not generate revenue
- A shell company does not hire or fire its employees.
- A shell company does not produce goods or services.
A company owner can use a shell company to hide the company from the public. Owners of shell companies use them to hide their assets from the public and law enforcers.
Shell companies can be legal entities if used the right way. A new company owner can use a shell company to store funds when starting up a company. A shell company is used as a legal business to take over another business. A company that wants to go public also uses a shell company.
A shell company’s aim is to hide the owner’s identity. Most shell companies are created in countries where businesses do not pay taxes. A shell company will be formed in a country where revealing a person’s bank information is against the law. Starting a shell company in such areas means that the company will pay less tax. Countries that are tax havens include Switzerland, Bermuda, Bahamas, Jersey, Cayman Islands, and The British Virgin Islands. These are some of the countries most people go to create shell companies.
For a shell company to start, it needs to be registered with the company register. A shell company owner looks for registered agents who help them in registering the business. Opening a shell company is easy because it does not need the owner’s details to start.
Why do people set up shell companies?
- Shell companies help people to invest in foreign markets. It assists a company owner to invest in markets outside the home country.
- Shell companies help protect the company’s and owner’s assets.
- Shell companies are important because they help hide the owner’s identity for safety. In countries with high crime rates, having a shell account will protect a person from being a target. Criminals will not be able to know if someone has money in his account.
- Shell companies help in holding money. It will be helpful when someone wants to start a business or a company.
- If a company or business wants to conduct business activities with a company with a bad reputation, it can use a shell company to do the business activities.
- Some people set up shell companies to stage hostile takeovers. It happens when a company wants to take another company without the permission of another company’s management.
Shell companies can be good if the reason for setting them up is good intentions. A business owner should weigh the reasons why he needs to have a shell company. Having a shell company can get you into trouble. If the state finds out a company has not been paying taxes, the owner will get into trouble. The company will risk being closed and all the money will be taken. The company owners might also be charged in a court of law.
Using shell companies can lead to negative company publicity. It is because most shell companies have a bad reputation. If the public finds out a business is a shell company, they might not want to be associated with it.
Before starting a shell company, a company owner needs to be sure, of what they are doing. Weigh both the pros and cons of having such a company. Having a shell company can be both good and bad. Depending on your intentions, a shell company might help you in the end. As a company owner, pay your taxes even if you have a shell company. It will help you avoid many problems.
This is not financial advice, and you should speak to a financial advisor before starting a shell company.