Shelf and Aged Corporations

Shelf Corporation otherwise known as Aged Corporation

A “Shelf Corporation," also known as an “Aged Corporation” (or “Aged Company” when referring to an LLC, for example) is a corporation that is already formed, but not in use, and ready for “purchase” by a new owner. There are many reasons that people purchase shelf corporations, and there are certain things to look out for when considering one of these “ready made” corporations.

Why should I use or acquire a Shelf Corporation?

Shelf corporations enable new owners to engage into business, credit, or real estate agreements as an established company without having to go through the entire process and waiting time frames of establishing a brand new corporation. Most potential creditors or business resources are hesitant to engage brand new or up-start corporations. By approaching them as an established corporation or company (obviously, the more years the corporation has been in existence, the better), the more likely your company will be taken seriously and this may grant your business more access to credit lines, banking relationships, leases, etc. These banking relationships, agreements, Dun & Bradstreet-type rating systems, etc., should all be considered when looking at potential aged corporations. Additionally, it is of paramount importance that these shelf corporations are acquired from trusted sources that know the intricacies of weeding out those with potential built-in or existing liability.

Once you have properly selected your shelf corporation, it will in turn enable you to establish an immediate history and instant credibility for your company and corporate image. In most instances, you will instantly be able to bid on state contracts (states generally have minimum longevity rules for companies that are allowed to bid on their contracts), obtain lines of credit easier and obtain loans from the Small Business Administration in your state, and attract potential investors more readily with an “established” corporation.

As is mentioned above, it is critically important that the shelf corporation you are considering not have any inherent or lingering liabilities. For the most part, this can be assured by looking into the history of the corporation and ensuring that the extent of its business activities were limited to the application of an Employer Identification Number and maybe the formation of a bank account.

There are some quantifiable exceptions to this rule. There are times when very well established corporations get shelved, for a variety of reasons, and these can be inherently quite valuable due to their tenure or amount of time in existence. These can be carefully scrubbed for liabilities and exposure by qualified entities, and are in high demand, with the demand and their price increasing depending on how long they have been established.

Simply put, if you are buying an aged corporation directly from its owners, there is a fair amount of due diligence involved: you should be concerned if the person or group selling the aged corporation has engaged in any transactions that may produce some type of future liability for the corporation or its stockholders. This may not always be easy to examine, and certainly requires some expert investigation. The best practices approach is to only acquire aged or shelf corporations from reputable providers (or resellers) who have a history of successful transactions in this arena. These providers can be counted upon to provide indemnification to the purchaser (a guarantee against pre-existing debts or liabilities) for the sale, and to conduct all of the due diligence prior to offering the shelf corporation for sale.

Shell Corporations

Often times Shelf or Aged Corporations are confused with Shell Corporations, both in terms of definition and their reason for existence. This confusion could not be more erroneous. Shell corporations are completely different entities, both in scope and in formation.

A shell corporation (which may be US or International Business Corporations - IBCs -, Personal Investment Companies - PICs -, front companies or "mailbox" companies) is an incorporated company that does not have any significant assets or operational structure, but merely serves as a clearing house for dissolving corporations, tax evasion, or for the handling of illicit funds. There are some legitimate reasons for the existence of shell corporations, and they are not in and of themselves illegal, but they are reputed to be a primary component of underground or illicit economies.

Summarizing Points

Shelf an Aged Corporation Advantages

• Saving time by foregoing the time and expense of forming a brand new corporation
• Instant access to contract and government contract bidding. Most state require that your company be in business for a specified minimum length of time.
• Instance credibility and an appearance of corporate longevity.
• More attractive to potential investors and investment capital
• Faster and easier access to banking relationships and lines of credit

• Pre-existing liability potential
• Pre-existing debt issues
• Pre-existing business transactions that may lead to future liability