Shelf corporation, Aged corporation, Pros and Cons
A shelf corporation, also known as a "aged corporation," is a pre-existing company that has been formed but never used for business operations. These corporations are often sold to entrepreneurs and business owners as an alternative to forming a new corporation from scratch. Aged companies similarly have a established time frame in the business.
BENEFITS
There are several benefits to purchasing a shelf corporation or aged company. One major benefit is that the corporation or company already has an established credit history. This can be especially beneficial for business owners who are looking to secure financing, as lenders are often more willing to extend credit to companies with a proven track record of financial responsibility. Additionally, a shelf corporation or aged company may already have a positive business credit rating, which can make it easier to secure lines of credit and other forms of financing.
Another benefit of purchasing a shelf corporation or aged company is that it can help to establish the business owner's credibility. This is particularly true in industries where experience and stability are highly valued. A company that has been in existence for several years is often seen as more reliable and trustworthy than a brand new company, which can be helpful when trying to attract new customers and establish relationships with suppliers and vendors.
Additionally, purchasing a shelf corporation or aged company can also offer some level of asset protection. Since the corporation or company is already formed and registered, it is considered a separate legal entity from its owners. This means that the assets of the corporation or company are protected from the personal liabilities of its owners, which can provide an extra layer of security in the event that the business is sued or faces financial difficulties.
Lastly, by purchasing a shelf corporation or aged company, the process of starting a business can be expedited as many of the legal and administrative tasks such as registering with the government, filing for tax ID, etc, have been completed.
In conclusion, purchasing a shelf corporation or aged company can offer a variety of benefits for entrepreneurs and business owners, including an established credit history, increased credibility, asset protection, and faster process of starting a business. However, it's important to be aware of the potential drawbacks as well, such as hidden liabilities, legal issues and always conduct a thorough due diligence and consult with a lawyer before making the purchase.
CONS
While there are certainly many benefits to purchasing a shelf corporation or aged company, there are also a number of potential drawbacks to consider as well. Some of the most notable cons include:
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Hidden Liabilities: While the assets of a shelf corporation or aged company are protected from the personal liabilities of its owners, the company may still be responsible for any liabilities or debts incurred before it was purchased. Therefore, it's important to conduct thorough due diligence and research the company's financial history before making the purchase.
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Legal Issues: In some cases, a shelf corporation or aged company may have been involved in legal proceedings or disputes before it was sold. This can create a number of legal and financial headaches for the new owner, who may be held responsible for settling any outstanding claims or lawsuits.
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Past Negative reputation: It's possible that the previous owner of the shelf corporation or aged company has a history of unethical or illegal activities. The new owner might have to work hard to overcome the negative reputation or perception that comes along with the company.
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Cost: While purchasing a shelf corporation or aged company can be a cost-effective alternative to forming a new corporation, it can still be quite expensive. In addition to the cost of the company itself, there may be legal and administrative fees to consider as well.
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lack of control over the company's history: when you are purchasing an aged company or a shelf corporation, you don't have control over the history of the company, it might be a potential deal breaker for some buyers.
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Doesn't guarantee success: Just because a company has been around for a while, doesn't mean it was profitable or successful. Additionally, the company may be in poor condition and require a significant investment to turn it around.
It's important to weigh the pros and cons carefully before making a decision to purchase a shelf corporation or aged company and consult with a lawyer or accountant to understand the financial and legal implications of the purchase.
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