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Shelf Corporation Purpose #1: The shelf corporation is used to assume a business history. In this way, the business owner can claim, "We've been in business for three years," or for as old as the corporation has existed. This is an effective use of a shelf corporation because most people won't ask in what capacity the corporation has existed or who owned it throughout that time period. It's an effective means to create a perception of business stability. The use of a shelf corporation for this purpose is a marketing strategy to increase consumer confidence. Of course, only start-up businesses need a shelf corporation for this purpose.
A shelf corporation ages like wine; however, choosing the right age is important, so as to not overpay. Think in terms of your customer. Does it really mean anything? An aged corporation that's, "been in business for three years" is important for a consulting firm but not for a card shop, in terms of dealing with customers. The core issue is whether the age of the business is a determinant factor in the customer's criteria. Does the age of the business provide the customer a perception of stability and solvency that's convincing to the customer? If so, then an aged shelf corporation may be in order.
Shelf Corporation Purpose #2: The shelf corporation eases the start-up of a business and when needing to establish business credit. Certain companies are known to only lease to small businesses that are at least six months old. Establishing corporate credit is easier with local suppliers when you have an aged shelf corporation. In that sense, buying a shelf corporation with at least six months of age is of great help.
Only buy an aged shelf corporation, or "aged corporation", when there's a real benefit from using such an entity.
Example A: Wanda seeks to open a gift shop. An aged corporation may only help her in terms of dealing with new suppliers. Customers don't really care whether they buy a gift from a store that has no business history. A retail operation that deals in jewelry, electronics, or other specialty item may be different; however, because follow-up is important. The customer may feel that an business that with a history is more stable than one without. This may make or break sales.
Example B: Mike is starting an internet-based consulting firm catering to small businesses. His clients will ask him how long he's been in business. Even though his business may be new, buying a two year old corporation may help him build instant credibility. On the contrary, Mike's many years of experience may speak volumes for him instead of relying on an aged corporation.
Ask yourself whether the age of the corporation is important to your clients or your creditors. If so, buying an aged corporation may be of benefit. Ultimately, how you sell yourself and your products/services will clinch the deal, regardless of whether you buy an aged corporation.
Shelf Corporation Purpose #3: Shelf corporations are ideal when action must be taken immediately, such as the transfer of key assets.
Immediate Solutions For Serious Business Problems
This is one situation that is best served by a shelf corporation or shelf limited-liability company (shelf LLC). You have assets to move and you don't have time to talk or crunch numbers. It's go-go-go. Obtain the EIN, set up the account and move the cash to meet your business needs.
Administration Over The Corporation & The Business Accounts
The key is to obtain the shelf corporation from a reliable individual that can expedite the Employer Identification Number (EIN) application and the formation of the checking account. Check balances with a VISA debit card, and online. Pay bills online with ease. The corporate officer applies for the EIN, sign all corporate documents without a personal guarantee, provide a face for the corporation, a mailing address, street address, fax number and phone number...AND a signer on the corporate accounts
Shelf Corporation Purpose #4: There are promoters of shelf corporations that advocate the use of aged shelf corporation for the repair of credit, or an alternative form of credit for those who are credit challenged. We are looking for success stories of this particular purpose in using a shelf corporation. Since creditors commonly request the Employer Identification Number and the Social Security Number of the corporation's principal, and they ask for a guarantor, the credit score of the Principal often becomes the determinant factor in extending credit. If the use of a corporation to build credit has worked for you, please provide us an example.
We are somewhat skeptical of the claims of "professionals" advocating the use of shelf corporations, or aged corporations, for the building of credit, when the principal is unsuccessful in securing a personal line of credit for himself or herself.
Shelf Corporation Purpose #5: A contract was entered into in the name of a corporation to be formed and an unforeseen liability has surfaced. The "promoter" is now personally liable for this contract. A shelf corporation may be able to adopt the contract and relieve the promoter of his or her personal liability. Forming a shelf corporation and arranging for the shelf corporation to adopt that liability can relieve the promoter from his or her personal liability. Talk to an attorney about the use of a shelf corporation for this strategy.
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