Commonly referred to as aged corporations, shelf corporations are established entities that are essentially placed on the "shelf." They are resold to an investor, who intends to benefit from the corporation's positive credit rating. Entrepreneurs purchase shelf corporations to avoid the hassle of starting a corporation from scratch. They also benefit from being able to bid on contracts that have seasoning requirements, and obtain business credit that requires a business history. A shelf corporation also offers credibility for those seeking the the appearance of business history. The procedure of incorporation differs by state.
Create an appropriate business name. The name should be either “catchy,” prestigious, or have some attractive element to make it more appealing to the entrepreneur who will be purchasing it. While the history of the shelf corporation is the main attraction, a good sounding company name adds allure. Search the secretary of state website in the state where you wish to incorporate. Do an online name search to make sure your proposed company name is available.
Register the corporation with the Secretary of State. The most common structure used in shelf company formation is the 'C' corporation—joint stock holding—structure. This allows company stock to be held by shareholders. File Articles of incorporation and bylaws with the state's secretary of state office's business division. The articles of incorporation give details about the location, name, mission, and business structure of the corporation. The bylaws show how the corporation will be governed. The forms and fees are available on the secretary of state's website.
Apply for an employer identification number (EIN) with the Internal Revenue Service (IRS). The EIN is needed to establish a business bank account. The IRS form SS-4 is completed and submitted to the IRS and an EIN is issued. The IRS also has an online EIN assistant feature on its website, which allows you to instantly register online for the EIN.
Meet business filing requirements for the state and municipality of incorporation. The object behind building a shelf corporation is creating a corporation that is in “good standing.” This means acquiring business licenses, seller's permits, and completing tax registration with the state and municipality of incorporation.
Build business credit. While shelf corporations are essentially placed on the “shelf” in many respects, it is important to establish business credit , because entrepreneurs often request to review the financial records of corporations before purchasing. Open accounts with vendors that report to the business credit reporting agencies. Dun and Bradstreet, Experian, and Equifax generate business credit profiles. Monitor your companies credit profile regularly. Make sure you are on time will all payments.
Wyoming, Delaware, and Nevada are the most common states used to incorporate shelf corporations, due to privacy and/or tax benefits offered by these states.
Make sure to file income taxes annually for the business—even if it shows zero income earned.
While the sale and purchase of corporations is legal, the motives behind purchasing shelf corporations are often the target of ridicule.
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