Are Shelf Corporations Legal?

Shelf corporations are not looked upon unfavorably by regulators, lenders, or the business reporting agencies. Many say they are unethical, borderline illegal, and some call them a fraud.

From Dun & Bradstreet… “It is unclear whether it is legal to use shelf corporations to access credit. It is clear, however, that this is a deceitful, unethical maneuver that serious entrepreneurs should avoid.” If the credit bureaus learn about the company being under new management, they will list it on their reports, effectively “re-aging” the company.

“Shell and shelf companies can be created domestically or in a foreign country. Shell and shelf companies are often formed by individuals and businesses to conduct legitimate transactions.

However, they can be and have been used as vehicles for common financial crime schemes such as money laundering, fraudulent loans, and fraudulent purchasing. By virtue of the ease of formation and the absence of ownership disclosure requirements, shell and shelf companies are an attractive vehicle for those seeking to conduct the illicit activity.” FDIC Special Alert, April 24, 2009