Have you heard of a shell company? If you’ve watched the news in the last few years you probably will have heard of them in connection to the rich and famous.
They came up during the Panama Papers scandal which revealed the extent that businessmen, politicians, and celebrities had been using off-shore bank accounts.
Here’s everything you need to know about a shell company and whether you should consider setting one up.
What is a Shell Company?
A Shell group is a company that has no substantial assets or active activities. In general, Shell companies are legal tools used in various business transactions to reduce tax liabilities, access financing, store funds, and maintain anonymity.
On the other hand, a holding company is the parent company of many different companies. Although the holding company is non-operational, it holds sufficient shares to control the entirety. This reduces the risk that the owner will be able to own and control a large number of companies.
Buying or selling a company may seem like a simple transfer of assets and property from one company to another.
Holding companies and shell companies are two instruments that can be used to avoid the potential liabilities of a traditional sale. They also ensure the anonymity required to facilitate a hostile takeover.
A shell construction company is a showcase asset that is not integrated into the daily routine of a company. A shell company can be used for pretty much anything.
No Clear Aims
As you can see, there is no financial objective. Shell companies are often used by domestic companies to set up tax havens or to benefit from lax tax rules in various other countries. This is particularly true for those who work abroad.
A tax shelter is a vehicle used by taxpayers to minimize or reduce their taxable income and tax liability.
Tax Havens
A tax haven is a foreign country that allows non-residents in a stable environment to pay little or no tax. This is primarily done by funneling it through types of shell companies registered in that region.
Shell companies allow domestic companies to invest in the U.S capital markets and conduct financial activities in overseas markets.
Examples of tax havens include the Cayman Islands, a British Overseas Territory, Dubai which has a very low tax rate. Jersey, another British Overseas Territory, is also considered a tax haven.
The Importance of a trusted and experienced business lawyer is crucial in setting up a tax haven or shell company.
They might be able to advise you about a new type of company currently popular. This is a SPAC or Special Purpose Acquisition Company. You can read more about them here.
Parent Companies
A shell or parent company exists in a paper office with no employees and no physical HQ. It has no registered owners or assets such as ships or intellectual property. It may not have bank accounts or hold any investments.
Shell companies are registered under the address of another company or an accountant or law firm.
Shell or its parent company acts as a trustee. For this reason, the company may not engage in any other activities outside of its own accounts. A Shell parent company is a legal instrument to achieve a larger purpose.
A Shell parent company immunizes one part of a company against the risk of another part of the business.
Holding Company
A holding company is a public limited company that owns shares in other companies.
Its main purpose is to hold shares in these other companies so that it has control over them. The holding company does not participate in the day-to-day business of the parent company.
Broadly speaking, a holding company controls several individual companies. On the other hand, a Shell group is a company that does not do business and has few assets. Unlike holding companies, Shell groups have no control over other individual companies.
Model Company vs Holding Company
A model company is a legal instrument that can be used, among other things, to create tax advantages, access financing, and store funds. It is also an effective tool for owners who want to maintain their anonymity.
Before you make a business transaction, an experienced lawyer can discuss the potential benefits of a holding company or Shell Corporation for your specific situation. To get the ball rolling you’ll need to create a
If your goal is to maintain control of many different companies through a variety of transactions, a holding company can be beneficial in many ways
It can help to increase management efficiency by centralizing spending and operational controls, lowering the cost of capital, improving lending rates, and much more, all of which are greater strengths of the holding than of the individual subsidiaries.
Setting Up a Shell Company? Be Sure To Get A Good Lawyer
You must get yourself a qualified business lawyer. They can check your situation for unique circumstances that require the use of creative legal instruments.
There a multitude of arrangements when it comes to shell companies and holding companies that can make it easier to invest abroad. Not everyone using these types of companies has them for nefarious purposes.
Many people use shell companies legitimately to maximize their revenue and streamline their business.
If you are interested in setting up a shell company or more information about shell companies legal be sure to check out the rest of our site.