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Over Shelf

April 29th, 2010 admin No comments

Over Shelf

Shelf Companies Uncovered: The Good, The Bad And The Ugly

Surprisingly enough shelf companies do not make shelving. They are formed companies that are available to buy from retailers who create the companies to sell as businesses. Those businesses might well include selling actual shelves however the name shelf company comes from the concept of a company being created then being put on the shelf to give a certain shelf life to that company.

The good in all of this is that if someone is looking to start a corporation for a variety of reasons they need not go through the process of company incorporation, however in most western countries these days the process of company incorporation is generally inexpensive and straight forward. The other good point of shelf companies is that finance or credit can be obtained against the company name.

This is sometimes affected by how long the company has been in existence. Like a good wine the retailer of shelf companies will have formed the company some time ago to give it some longevity and this looks good in lenders eyes when applying for finance. In some places you cannot trade or even make proposals for specific contracts unless you have an incorporated company, this is another popular reason for purchasing a shelf company.

Corporate credit and investment capital aside the other good reason for investing in a shelf company is that you can gain a certain amount of consumer confidence of the company has been in 'operation' for some time. Some of these beneficial features of shelf companies are dubious dependent on what provider you buy from and will be made clear when we examine the bad and ugly features of shelf companies.

Some shelf companies are not newly formed at all, in fact many companies that have gone into administration or have been liquidated end up being sold to companies who will let the dust settle then sell the company on as a shelf company. As stated it all depends on choosing a scrupulous provider of the service, as many of the aforementioned companies might well have poor credit ratings and will therefore not be eligible for corporate credit.

The ugly side of shelf companies is that all the beneficial features can backfire if credit agencies discover that the corporation is in fact purchased. It is dubious whether shelf companies can improve access to capital, especially in the current financial market and when a new company recognises the change of management then it can be listed as 're-aged', this will not be looked favourably on by credit agencies.

Avoiding the negative features of shelf companies can be done by researching the providers and companies themselves. There are many online providers of shelf companies and the trick is to find one with a proven track record. If you are looking for a shelf company for short cuts into capital investment it might well backfire on you, however if you are looking for enhancing features to a well conceived business venture then it is a sound investment.

About the Author

Dominic Donaldson is an expert on shelf companies and contributes to trade publications on the subject.