What is a “Shelf Corporation?”

by Norris Law Group on July 23, 2014

What is a “Shelf Corporation?”You may have heard of a shell corporation—a corporation set up with no real intention of doing business and no assets or transactions. But a shelf corporation is similar to a shell corporation, but has key differences. Bloomberg Small Business explains what shelf corporations are and why businesspeople should avoid them.

According to Bloomberg, a shelf corporation is a shell corporation. Shelf corporations are set up—often in no-tax or low-tax states friendly to business, such as Wyoming or Utah—and then “put on a shelf” for a time so the corporation can establish a credit history. Shelf corporations are set up with the intention of being sold. They are often offered for sale to people who want to set up a corporations without going through the steps necessary to create them. People who can’t qualify on for loans on their own based on their credit history or business history may also be in the target market for a shelf corporation.

Bloomberg uses shelf corporations set up in Wyoming as an example. Marketers of shelf corporations will set them up and start funneling transactions through them. It takes around 10-15 transactions in a year to make a corporation look “credit-worthy.” The shelf corporations in the Bloomberg article were offered for sale for around $5000 each.

Depending on the state, shelf corporations may or may not be illegal. But they are almost certainly unethical, and the sellers will usually demand a lot of money upfront. If you see or respond to ads offering shelf corporations, the wisest decision is to stay away.

Attorney Graham Norris and his associates at the Norris Law Group serve the residents of Utah County and throughout Utah in the area of family law, including prenuptial agreements. Contact them today at 801-932-1238 or online for a free consultation.

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