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A shelf corporation, shelf company, or aged corporation, is a company or corporation that has had no activity. It was created and left with no activity – metaphorically put on the “shelf” to “age”. The company can then be sold to a person or group of persons who wish to start a company without going through all the procedures of creating a new one.

Common reasons for buying a shelf corporation include:

• To save the time involved in taking the steps to create a new corporation.
• To gain the opportunity to bid on contracts. Some jurisdictions require that a company be in business for a certain length of time to have this ability.
• To create an appearance of corporate longevity, which may boost investor or consumer confidence.
• To gain access to investment capital.
• To gain easier access to corporate credit.

These reasons are open to criticism. Many years ago, it would take months to properly incorporate a business. However, it is now quite easy, at least in Australia, the United States, Canada and Western Europe; to do so. In fact, it can now be done in as little as a couple of hours in some jurisdictions. A corporation might end up “on the shelf” precisely because of a bad business history. It is questionable whether a shelf corporation improves access to capital, since creditors and investors look into a company’s history as part of due diligence.

A number of consortia “produce” and sell shelf corporations, promoting the fact that the new buyer can at the same time have a corporation with a long history, and yet have complete control over the establishment of the corporation’s board of directors and shareholder profile.

One item to be aware of is the re-aging of the shelf corporation. If the credit bureaus learn about the company being under new management they will list it on their reports effectively “re-aging” the company. The only way to avoid this is to make sure the credit bureaus do not find out.

See also

• Shell (corporation)

References

• Michael Spadaccini, Incorporate Your Business: In Any State (2007), p. 253.
• Mark William Walma, Patricia McCann-Smith, The Fundamentals of Corporate Law and Procedure (2000), p. 54.

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Guarantee of Obtaining Corporate Credit

Warning! You have probably heard a lot of different companies making claims about how they can guarantee to get your business or corporation, credit. They may say things like, “with our credit building program, we guarantee that you will get up to $20,000 or $50,000″ and so on.

The key wording is “up to”, because they really do not know if you will get the full amount of funding needed for your business. What they know that you do not is the lending criteria of the common business creditors. They know the most likely creditors that will say yes based off of your business credit profile and your personal credit scores.

These can be valuable services, since they can help to decrease the time it takes to fund your business and help to find the creditors that are more likely to approve your credit application. However, what is not in the sales copy is the fact that most of the credit building relies on retail vendor credit, such as, your local office supply stores or home supply stores to build out a Dun & Bradstreet credit profile.

To obtain “real money” lines of credit, you are going to need a good personal credit score of at least 620 but preferably 680 or better. Don’t worry bad credit does not stop you from building credit in your business the process may just take longer.

Guaranteed credit card or lines of credit

These services may even offer a credit card just for being their client, but it is usually only credit for their services and/or products. There have even been companies offering programs were they claim you can receive up to $100,000.00 in cash credit for a fee of $5,000. Does that sound too easy? Keep in mind, if it was that easy, most small businesses would have an easy time obtaining the needed funding.

If you personally have $5,000 that you can utilize to build corporate credit, you would be better served going to a bank like Wells Fargo and getting a business secured credit card which can become unsecured with a good payment history. Just remember “Buyer Beware.” If it sounds too good to be true, it probably is.

Buying Aged Companies / Aging Your Business

There is a popular belief that you can quickly obtain a large amount of credit by purchasing a Shelf-Corporation. Well in some cases you can. After all, most business credit applications will ask for a personal guarantee if the company is less than 2 years old. In order to do this, you really have to investigate the so-called shelf- corporations.

The first thing you need to investigate is whether or not a negative history is attached to the company and that the tax I.D. number is as old as the company .It is also important to make sure all of the companies documentation is up to date and the company should have a bank account that is no less that 6 months older than the company, unless the company has been in business for a long time and the bank account is about 1-2 years old. Basically this should be a real company that has been doing real business, not just documents someone filed in hope of selling it off as an aged corporation at a later date.

Do your homework, because there are a lot of companies that say they have aged corporations or shelf-corporations they can sell you. Always ask a lot of questions and make sure that the corporation you are purchasing is a real business. Not just papers filed with the state.

Final Word

The business credit industry is not regulated by the government the same way personal credit is, therefore you will have to do your homework when speaking with a credit building service and ask a ton of questions.

Just because a company has been in business for a long time, does not mean they are not over charging for their services or that you are getting the kind of service that is advertised. If the program sounds too easy or too good to be true, then you are most likely wasting your money. Keep this in mind. It takes years to establish a good business credit history not months.

Erik Salmon, CCFC, is the author of “The Art of Corporate Credit & Finance” and has consulted with over 10,000 companies on how to build corporate credit and fund business ventures. If you would like to find out more about business financing visit http://www.makeitandkeepit.com

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An example would be a corporation filed with the Secretary of State in any state but that was never actively used, it was kept on the “shelf”. Usually a company may file many corporations at one time with the intent of not using them but keeping them for resale at a future date. The older they corporation gets the more value it is perceived to have.

One of the reasons they cost more is there are fees associated with keeping the corporation current. The fees differ in every state, some states may cost $850 per year just to keep it active and some may only be $50 per year. These are things you need to weight when thinking of getting a shelf corporation. Depending on your goals it may or may not be an advantage to you to purchase a shelf corporation.

I have seen corporations over 10 years old being sold for $20,000. In my opinion there doesn’t seem to be an advantage of ever purchasing a shelf corporation over 2-3 years old. You may just be spending money on something that will not really provide any value to you.

One thing you definitely want to know is the history of the corporation. It may be a entity that was actually used many years ago and the owners let it lapse so it may have outstanding liens or debts against it. If you take it over you may become responsible for those debts, so always do your homework.

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Yes, but it is sort of like building muscle you start out small and must keep working at it to build it bigger and bigger. Just as in becoming Mr Olympia you don’t start at the top it’s a lot of hard hours in the gym before ever getting close to becoming Mr. Olympia.

Building corporate credit is much the same. You can do it yourself, there are many books, ebooks and information out there so that you can learn what you need to do. It just needs to be done in a very systematic way, there steps you have to take need to be in a certain order.

Also, there are many companies out there who will assist you in building the credit making sure that you take all the steps in order. You may start with a new corporation or a shelf corporation depending on your goals. A shelf corporation older than a couple years is probably just a waste of money, you will pay a much higher premium for little benefit.

It will help in building corporate credit if you have a corporation 2 years old because it shows up as the corporation being around longer giving the impression as greater stability. When you get over 2 years the creditors may wonder what you did for the last 5 years when you have no history.

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If it exists I have never seen it. I have seen a lot of claims and people wanting huge fees upfront to get you one. The more investigation done into this area seems to back up my theory that the only people getting any money are the people selling you the dream. Do you think a is bank is going to lend money to a corporation with no actual business or history? Not likely, especially in this financial climate. My favorite question to ask them is. Do you have one of these magic corporations? Always their answers are very vague and evasive. Then I ask if they are so great why don’t you have several in place already?

Having talked to over a hundred people telling me that they can produce and aged corporation with corporate credit already in place it’s always the same. Basically they say send me your money and in a month or so you will get the corporation. I haved talked to many people who sent their money and never got anything but excuses.

One day several months ago I got a call from the Secret Service in New York asking me about a paticular company that claims to be able to produce these corporations. In talking with the agent she revealed that he had ripped off many people some for over $25,000. So be very careful and never give them large amounts of money upfront.

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If your company needs some credibility to get money to grow or to land a big client.

A Nevada Shelf Corporation is the Answer for you. All of our shelf corporations are formed in Nevada.

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