Shelf
Corporation Purpose #1: The shelf corporation is used to assume a
business history. In this way, the business owner can claim, "We've
been in business for three years," or for as old as the corporation has
existed. This is an effective use of a shelf corporation because most
people won't ask in what capacity the corporation has existed or who owned
it throughout that time period. It's an effective means to create a
perception of business stability. The use of a shelf corporation for
this purpose is a marketing strategy to increase consumer confidence.
Of course, only start-up businesses need a shelf corporation for this
purpose.
A shelf
corporation ages like wine; however, choosing the right age is important,
so as to not overpay. Think in terms of your customer. Does it
really mean anything? An aged corporation that's, "been in business
for three years" is important for a consulting firm but not for a card
shop, in terms of dealing with customers. The core issue is whether
the age of the business is a determinant factor in the customer's
criteria. Does the age of the business provide the customer a
perception of stability and solvency that's convincing to the customer?
If so, then an aged shelf corporation may be in order.
Shelf
Corporation Purpose #2: The shelf corporation is occasionally
needed for asset protection purposes. There are instances when a
business is writing off expenses to a privately controlled corporation that
serves as a supplier (shelf corporation). The shelf corporation runs
the business operation dry of assets and income. This works when a
lawsuit is foreseeable or, worse yet, already filed. Since the shelf
corporation existed before the litigation was foreseeable, then the
transactions appear more so legitimate than if the transactions were
executed with a corporation with a similar date as the civil complaint.
See ASSET PROFILE and their flash
presentation on this strategy. It's terribly effective at transferring
income and assets from a vulnerable business operation to a shelf
corporation that is privately controlled through an attorney.
Shelf
Corporation Purpose #3: The shelf corporation assists the business
start-up when needing to lease business equipment. Certain companies,
such as Gateway Computers, are known to lease to small businesses that are
at least six months old. Establishing corporate credit is easier with
local suppliers. In that sense, buying a shelf corporation with at
least six months of age is of great help.
Shelf
Corporation Purpose #4: Shelf corporations are ideal when action
must be taken immediately, such as the transfer of key assets, to a shelf
corporation. This may apply in cases such as taxation and asset
protection issues.
Shelf
Corporation Purpose #5: There are promoters of shelf corporations
that advocate the use of aged shelf corporation for the repair of credit, or an
alternative form of credit for those who are credit challenged. We are
looking for success stories of this particular purpose in using a shelf
corporation. Since creditors commonly request the Employer
Identification Number and the Social Security Number of the corporation's
principal, and they ask for a guarantor, the credit score of the Principal
often becomes the determinant factor in extending credit. If this has
worked for you, please provide us an example. We are somewhat
skeptical of the claims of "professionals" advocating the use of shelf
corporations, or aged corporations, for the building of credit, when the
principal is unsuccessful in securing a personal line of credit for himself
or herself.
