What is a Shelf Company (Full Overview)

[Launder Expert]

What is a Shelf Company? Everything You Need To Know​

Forming a company is a big task, but the more significant task is the registration and all the paperwork process. To overcome this, shelf companies were introduced. If you are wondering what is a shelf company, then it is a pre-registered company that has completed all the paperwork and registration process. In this blog, we will learn about what is a shelf company, thier origin, the steps to acquire one, and more.

What is a Shelf Company?​

A shelf company, shelf corporation, or aged company is said to be a pre-registered company. The term “Shelf company” means a company or organization sitting on a shelf and waiting to be bought by someone willing to start a new business. A shelf company helps startups avoid the entire company formation and registration process by itself. A shelf company is ready-made and has already completed the required paperwork.

Definition and Origin of Shelf Companies​

From the above definition, we all know what is a shelf company. A pre-registered company is bought by people who are willing to start a business immediately. The term shelf company originated when it used to take a lot of time to register a company. Many business people want to start a business immediately, but the registration process takes a lot of time. To avoid this hustle, a shelf company was introduced, which is an established company that has already gone through the process.

How Does a Shelf Company Work?​

After looking into what is a shelf company, it is important to know the way a shelf company works.

• Transferring the original ownership of the company to the owner who is buying the company.
• When a buyer is looking forward to buying a company, they prefer to buy a shelf company (a company with history) instead of forming a new company.
• It works as a ready-made company for the buyers where operations can be started immediately.

Common Industries Using Shelf Companies​

Buying a shelf company is common among industries where buying the pre-registered company is not a demerit including:

• IT Startups
• Venture Capital
• Real Estate
• Legal Sector
• Accounting Sector

Advantages and Disadvantages of Shelf Companies​

After learning what is a shelf company it is important to know about the benefits of the shelf companies and disadvantages of the shelf company.
Advantages:

• Starting a startup after buying a shelf company will help you gain the instant trust of the suppliers, as it promotes the professional image of the company.
• Approaching a bank for a loan becomes easier.
• Saves the time for the registration process.

Disadvantages:

• Nowadays there are a lot of scams going on where businessmen end up paying a big amount for the company that is not even worth it.
• Some shelf companies have a lot of liabilities. Make sure to be aware of that.
• Sometimes banks avoid giving loans to the companies even if they are aged.

Key Difference Between Shelf Company and New Company​

Shelf company vs new company is always common people get confused with. After learning what is a Shelf company, it is important to know these basic details. To simplify the point, here are the key differences between them:

Shelf Company​	New Company​
A shelf company is a company that does not operate.	A new company is ready to start operations.
A shelf company has gone through the registration process.	A new company needs to go through the registration process.
Forming a shelf company is more expensive because of their age and pre-existing legal status.	Forming a new company is not so expensive in comparison to a shelf company.

Legal Considerations When Buying a Shelf Company​

After knowing what is a shelf company, it is important to know what are the shelf company legalities considerations.

• It is important to check out the transaction history of the shelf company, to know whether it has any debts under its name or not.
• Verify whether the seller is legitimate or not.
• Reviewing all the required and important documents is a very essential process.
• Review the details in the documents thoroughly.
• If necessary then make sure to take legal advice from the advisors to avoid complexities in future.

Costs Associated with Shelf Company​

The primary costs associated with the shelf company includes the costs of purchasing price of pre-registered company (the cost is directly proportional to the age of the shelf company), costs of transferring the leadership from one person to another, costs of changing the name of the company, and other minor costs.

How to Choose the Right Shelf Company?​

After learning what is a shelf company, it is essential to know a way that will help you choose the right shelf company or buy a shelf company. To get the hands on the right shelf company, one must:

• To buy a shelf, one must identify their business needs and goals. This. This will help them select the company of their choice.
• The older the company, the better the credibility.
• Make sure that the information given about the company is transparent.
• Make sure that the seller is reputed.

Steps to Acquire a Shelf Company​

To acquire a shelf company, one must:

1. Find the type of company you want to buy. This includes business objectives, desired industry, desired age of the company, and legal structure.
2. Find a reputable and experienced seller in this field for some time.
3. Look for more options.
4. Negotiate the purchase price.
5. Make the payment as per the agreement.
6. Transfer the ownership under your name.
7. Finally, update the company's information.

Frequently Asked Questions​

1. What is a Shelf Company, and how does it work?
A “shelf company” is a pre-registered company or business that never conducted any business in reality. A shelf company does not hold any assets or liabilities.

2. Are shelf companies legal to use?
Yes, shelf companies are legally used because they are registered legal entities.

3. What are the advantages of buying a shelf company?
A shelf company offers various advantages, such as better credibility and business history, easier access to loans and credit, faster startup time, and more.

4. What is the difference between a shelf company and a new company?
Amateurs are confused about shelf company vs. new company. A business company is registered but has never been used for any business activity. A new company is created from scratch and goes through an entire registration process.

5. Can a shelf company improve business credibility?
A shelf company can improve credibility by providing an established incorporation and business registration date.