panda1...
As you'll see from several searches I'll include at the end
of this answer, which returned essentially no results for
"shelf corporation" in conjunction with words like "danger"
"pitfalls" and "problems", there seem to be no real drawbacks
to shelf corporations, assuming you can benefit from their
unique advantages.
The advantages of such a corporation are multiple. Companies
Incorporated lists the following:
- Immediate availability.
- Instantly establish a history for your company.
- Show longevity and improve your Corporate image.
- Ability to obtain business credit cards and lines of credit.
Many banks require businesses to have been in existence for
six months to two years prior to granting credit.
- Ability to obtain bank loans.
- Ability to bid on government contracts. Many government
agencies require that you be in business for a specific
minimum period of time to be eligible to bid on agency
contracts.
http://www.companiesinc.com/agedcompanies.asp
Another site, Bulletproof Asset Protection, lists similar
advantages, and adds the following:
- Companies bidding on government contracts may need to be
5 years old.
- Manufacturers may require an aged status.
- A shielded, aged company can be used to set friendly
liens that you want to be able to pre-date.
It also mentions what is probably the biggest thing to
watch out for: it is critical that the corporation has
never been used.
http://www.bulletproofasset.com/shelf_corporations.htm
This precludes the possibility that you might inherit
legal, financial or tax problems from previous activity.
A SHELL corporation, e.g., is a company that is incorporated
but has no assets or operations. These are sometimes used set
up by fraudulent operators as fronts to conceal tax evasion
schemes, and have been under Senatorial scrutiny of late,
according to this article on Bankers' Ideanet:
http://www.sheshunoff.com/ideanet/index.php?itemid=258&catid=2
It would be very unfortunate to purchase a shelf corporation
only to find, upon close investigation, that it had been used
to launder money, as shell corporations sometimes are.
The only other thing would be to make certain that the age of
the corporation matches your intended advantages. If you don't
intend to solicit government contracts, there might be no
advantage to paying more for a corporation that is 5 years old
when one that is 2 years old will serve your purposes.
That's really all I've been able to find, but not for lack of
trying. Please see the search results below which failed to
find any problems associated with shelf corporations.
If anything is unclear, or there's anything you need to ask,
please post a Request for Answer Clarification prior to rating
this answer.
sublime1-ga
Searches done, via Google:
shelf corporations
://www.google.com/search?q=shelf+corporations
"shelf corporations" dangers
(only 68 results, none of value)
://www.google.com/search?q=%22shelf+corporations%22+dangers
"dangers of shelf corporations"
(0 results!)
://www.google.com/search?q=%22dangers+of+shelf+corporations%22
"pitfalls of shelf corporations"
(0 results!)
"pitfalls of shelf corporations"
pitfalls * shelf corporations
(0 results!)
://www.google.com/search?q=pitfalls+*+shelf+corporations
dangers * shelf corporations
(only 3 results, all for SHELL corporations)
://www.google.com/search?q=dangers+*+shelf+corporations
problems * shelf corporations
(only 13 results - mostly SHELL corporations)
://www.google.com/search?q=problems+*+shelf+corporations
issues * shelf corporations
(only 11 results - mostly SHELL corporations)
://www.google.com/search?q=issues+*+shelf+corporations |
Request for Answer Clarification by
panda1-ga
on
25 Oct 2006 23:16 PDT
sublime1,
thank you for your quick response.
Perhaps what I am really looking for is a way to determine the *value*
of a shelf Corporation.
Take the following for an example for Joe and Larry:
Lets say Joe has $500,000 in assets always pays on time furthermore,
he has a corporation that is 5 years old. However, Larry ALSO has
$500,000 in assets and he always pays on time as well The ONLY
difference is his corporation is 10 years old. At this point how much
MORE would Larry be able to borrow than Joe?
If you can answer this problem I will include an additional 20.00 tip
on top of the 10 bringing your answer to a total of 30.00 in tips. If
not let me know and I will be happy to pay you for what you have
already done.
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Clarification of Answer by
sublime1-ga
on
26 Oct 2006 00:49 PDT
panda1...
Thanks very much for the feedback and the challenging clarification.
The very credentialed and highly honored Lea Strickland asks,
in an article on the North Carolina Journal for Women website
in which she interviews John Wroton, Assistant Vice President
of Harrington Bank, Chapel Hill, North Carolina:
"Are there differences in documentation in the application
process from the bank?s and business? perspective between
new (fewer than three years old) and established businesses?
JW: Part of this will depend on the bank. Some banks may not
even consider a loan if the business has not existed for at
least three years. Typically, however, the application process
is very similar, regardless of the age of the business. Just
because a business has been around for 20 years doesn?t
necessarily mean it is a good candidate for a loan today.
As anyone in business knows, things change - competition,
technology advances, and changing social or demographic
trends may all impact how a business is performing.
Historical performance is important, but the banker will
be more focused on what is happening now.
For the loan application, the borrower should be prepared
to have:
- two to three years of business tax returns if the business
has been operating that long,
- year-to-date financials printed from the business' accounting
software program, including income statements and balance
sheets, and
- financial projections for the next 6 to 12 months."
Much more on the page:
http://www.ncjournalforwomen.com/months/2005_months/sep05/sep05strickland.htm
Given this, the advantages of a shelf corporation for obtaining
better business loans based on the age of the company may be
limited. If the shelf corporation has the highly valued quality
of never having been active, in order to avoid entanglements in
prior financial, legal or tax problems, it will also have none
of the requisite tax or accounting records which are requested
by a lender for a loan, assuming that the business is new.
The above response also suggests that, even if the business has
been active for 5 years after being taken off the shelf where it
sat for an additional 5 years, the focus of the lender will be
on currrent and recent activity and performance, vs simply the
10 year age of the company.
This is echoed at the College of Business Administration site
at Winthrop University of South Carolina on a page citing the
SOUTH CAROLINA SMALL BUSINESS DEVELOPMENT CENTER BUSINESS PLAN
OUTLINE AND CLIENT LOAN APPLICATION, under History of the
Business:
"Include the following:
Image or reputation
Number of employees (estimate)
Last year?s sales volume and profit (Will need tax returns)
Any significant events that have affected the company?s development
Date the company was founded"
http://cba.winthrop.edu/sbdc/business2.htm#business
More, and similar results can be found from this Google search:
business loans "age of the business"
://www.google.com/search?q=business+loans+%22age+of+the+business%22
I believe that is responsive to your Request for Clarification,
but if I've missed the boat, or you have additional questions,
please feel free to inquire further.
sublime1-ga
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