OFF THE SHELF COMPANIES

Many businesses on the Internet advertise “shelf companies,” that is, companies that were incorporated one or more years in the past but have never engaged in business. The argument is that the use of a shelf company gives potential creditors and business partners the impression that your business has been in existence for a longer period of time. Theoretically, this is supposed to assist you in obtaining corporate credit. Some persons even state that it helps with respect to a public merger.

While there are some international jurisdictions which require your business to be in existence for a set period of time prior to obtaining contracts, this is not generally true in the United States. Oftentimes, the business is selling shelf companies claim that they are able to assist you in obtaining corporate credit or build a credit history. However, the service will cost you and it may not be cost-effective. In addition, there have been many cases of inactive companies being hijacked by these consultants. For example, a company may have gone out of business and the true owner lets the corporate registration lapse with the state of incorporation. Scammers know that the business  owner has abandoned the business, and reinstate the company, changing the name. At times, the true owner does return and you are left with nothing, and possibly could be accused of involvement in an illegal enterprise.

There is absolutely no benefit to using an off-the-shelf company for going public. In fact, it only makes the process more difficult, because you would have to show receipts to your auditor for all the periods for which the company has been in business, and of course, you won’t have those receipts.

In summary, there is generally very little of vanished purchasing an off-the-shelf company. Save your money.