A shell corporation is defined as a business that does not have any active business operations or rather significant assets apart from money. Contrary to common perceptions, shell corporations aren’t necessarily illegitimate or illegal. They serve a major purpose mainly for business startups. On the other hand, a corporate shell can act as a tax avoidance leeway for myriad legitimate business setups.
How Are Shell Corporations Formed?
Shell corporations are formed before the commencement of operations with a view to obtain finances. There are also times when they are used as front for tax evasion. However, these corporations are legal entities in majority of countries even though they are mainly used in black and grey market activities in most parts of the world today. It is vital to note that these types of businesses should not be confused with dummy corporations. The dummy businesses are created mainly for the purpose of illegal activities. Any company can be part of the shell but it is vital to ensure legality by all means.
How Does A Corporate Shell Help Your Company And Investors?
First off, shell corporations are legit legal entities. They do not possess any actual assets or factual business operations. They play the role of transactional vehicles for your business and for a wide range of purposes. Therefore, when you are part of the shell, you can rest assured that you will be protected by the law. There is no legal confinement that states a company ought to have assets. Therefore, the shell is a better bet.
Secondly, since the corporate shell is used by most businesses to obtain financing, it will be a great help both for your company and investors. You will be able to source for the right amount of finances that you require in order to keep your business moving. These finances then allow you to leverage and get the most out of your business.
Again, being part of the corporate shell allows your company and investors to enjoy favorable tax treatment. So, if your local or state tax laws are hurting your business progress, being part of the shell can offer you needed protection. You should not let taxes take the money that you need to re-invest into your business to grow.
A corporate shell can also hold stock or intangible assets for your business entity. As much as they do not have any physical assets for themselves, they can help in handling and managing your intangible assets. They operate anonymously in most instances and even exist in the form of a name but they are absolutely legal, so you can trust them.
Additionally, a shell corporation could also help in facilitating cross-border and domestic currency and asset transfers. So, if you are operating globally and you require making bulk payments or money transfers to different parts of the world, the corporate shell is the best option.
A corporate shell is of great essence in many facets of business operations, especially in the protection of intellectual property. Though many people see it as a mix of both legal and illegal transactions, the benefits seem to outweigh the demerits.