Legal Shell Corporations

by Norris Law Group on August 4, 2014

Legal Shell CorporationsYou may have heard of a “shell corporation” (not to be confused with the Shell Oil Corporation, one of the largest companies in the global oil and gas industry). Businesses of all sizes often set up shell corporations for various reasons. These reasons, however, can be perfectly legal—or on the wrong side of the law. If you are considering setting up a shell corporation, it is imperative that you know the difference. Author Joe Goldman explains this in a recent article for Equities.com. This edition of our blog will discuss legal shell corporations; the next edition will provide examples of illegal shell corporations.

Legal Shell Corporations

Some reasons to set up a legal shell corporation might include:

  • “Brand management.” For example, let’s say that a high-end couture clothing designer would like to set up another line to market to the “everyday” customer and sell this line on a home shopping channel. If the designer sets up the new line under the existing couture company, the reputation of the couture line might be affected. The designer may set up a shell corporation for the new, less expensive line, and the public may never know unless they seek out the information.
  • “Reverse mergers.” Shell companies may be used as a vehicle through which a private company may purchase a public company, thereby avoiding the IPO process. This is known as a “shell-facilitated reverse merger,” and can take just weeks rather than the months required for an IPO.
  • “Tax benefits.” Even major corporations like Apple use overseas shell corporations to avoid paying a higher corporate tax rate in the US. While some criticize companies for doing this, it is not illegal, provided that the corporation sets up the shell corporation properly.

Attorney Graham Norris and his associates at the Norris Law Group serve the residents of Utah County, UT and throughout Utah, Wyoming and Idaho. Contact them today at 801-932-1238 or online for a free consultation.

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