What is a Shelf Company and Why Use One?

When starting your own business there are multiple options when it comes to incorporation. Should you incorporate your company from scratch or should you purchase a shelf company? In our latest blog we explore shelf companies and how they can benefit entrepreneurs.

• What is a shelf company?
• Why use a shelf company?
• Are shelf companies legal?
• Can the shelf company name be changed?
• How much does a shelf company cost?

What is a shelf company?

Shelf companies are readymade or ‘off the shelf’ companies that have often been purchased by a provider such as SFM, who hold the company until a purchaser is found. Shelf companies are also known as ‘shelf corporations’ or ‘aged corporations’.

Providers purchase shelf companies to have them available for clients looking for aged corporations. Providers who purchase shelf companies do not engage the incorporated company with any business activity and the shelf company has no real assets.

Once the shelf company is purchased by a client, the ownership of the shelf company will be transferred from the provider to the new owner who can commence trading activity under the company name straight away.

Why use a shelf company?

Shelf Company Business Set Up is Quicker

Entrepreneurs that want to get their business set up and running quicker may choose an aged shelf company due to the incorporation already being established. The shelf company will already be registered and established and only requires officer names to be changed. This can be done electronically in most cases which can take as little as a few hours, which is a lot quicker than incorporating a new company. Once the officer names have been changed, the new business can start trading immediately.

Despite the company already being incorporated the corporate service provider will still need to conduct due diligence.

Shelf companies and client/ supplier trust

Newly incorporated businesses often face difficulty doing business with new suppliers due to suppliers preferring seasoned tradelines. Some industries insist a company must have been registered for a certain amount of time before they allow tenders to be made. A shelf company eliminates the chances of this happening.

The same issue can occur with new clients. People regularly put their trust in older businesses as they are likely to be well-established with strong experience, reducing risk. Older companies often celebrate their anniversaries which helps customers make an informed decision about their experience, unfortunately newer companies are not able to do this, however by purchasing a shelf company this is made possible.

Using a shelf company promotes a long-standing image and prestige.

Frequently asked questions on Shelf Companies

Are shelf companies legal?

Yes, shelf companies are regular corporations that have not yet been used but are of a certain age. All shelf companies provided by a reputable corporate service provider will be incorporated legitimately and legally. The main reason for buying a shelf company it the ability to show that the company has history.

Can the shelf company name be changed?

Yes, all companies are eligible to name changes at any time as long as the name is not already registered to another company.

How much does a shelf company cost?

Shelf companies can vary in prices depending on the age of the corporation and jurisdiction; however, they are often sold at a premium price range due to the benefits they hold. Renewal fees also apply to shelf companies which should be considered.