Shell Corporation

A corporation without assets or operations that may or may not be illegal, and is often properly used for tax avoidance as opposed to tax evasion.

 

Much like your younger cousin who took a gap year to “find himself” but spends all day playing video games, shell corporations neither make money nor provide the world with goods and services. Instead, these legally distinct entities are designed to hold funds and/or serve as the management for another legally distinct entity’s financial transactions. While you can own a shell corporation, you cannot work for one, as there is really no way for a holding company to have employees. When properly constructed and operated, shell corporations may be financially beneficial in numerous, legally sound ways. When used to evade taxes, operating a shell corporation may land you in white collar prison. Which is rough, because in white collar prison you usually have to sleep in rooms full of bunk beds, like camp… and grown adults just aren’t meant to sleep in bunk beds.

 

Individuals, established businesses and startups can all use legally sound shell corporations to their advantage. Wealthy individuals may benefit from forming a shell corporation when engaging in estate planning. Startup founders may form a shell corporation to hold the money they are raising prior to launch. Established businesses may look to shell corporations for security, ways to legally avoid certain taxes and a place to safely store assets in advance of an acquisition or merger. Oftentimes, these financial tools are used to lower tax liability in one’s home country if they are incorporated in tax haven countries like Belize, Switzerland or Panama. If registered in the U.S., shell corporations must register with the Securities and Exchange Commission, but information about the ownership and operation of individual shell corporations can still be difficult to track down.

 

EXAMPLE:

“No, dude. I don’t own gas stations now… that’s THE Shell Corporation. I set up A shell corporation to hold my startup funds.”