Establishing a business is a very daunting task. One important consideration is whether to establish a new company or whether to acquire an already shelved company. There are merits and demerits for both options.
In the article that follows, we shall look into the differences, benefits, and possibilities when one is more suited to your business than the other.
Overview Of Shelf Companies
A shelf company is a pre-registered company created but inactive until sold to another party. In essence, these companies exist “on the shelf “so that they could later be bought. They have established dates of incorporation and have engaged in no business activities before. It is different from a shell company, which is an entity that is created primarily for financial tricks purposes and typically has either little or no substantial assets and/or operations.
Why Do People Buy Shelf Companies?
Buying a shelf company has many advantages:
Time Efficient: Buying a shelf eliminates the time needed for incorporation, approvals, and registration processes.
Business Credibility: A company with an older incorporation date may appear more well-established and trustworthy, which is advantageous when applying for loans or entering into contracts and partnerships.
Fast International Expansion: Shelf companies are used by businesses that want to start operating in foreign markets quickly without waiting for bureaucratic delays.
Less Work: The legal framework and the groundwork for operations with respect to a brand-new shelf company are already in place. Thus, the operational setup will be simpler.
The Process Of Buying a Shelf Company
Shelf companies are marketed by companies that specialize in corporate services. A purchaser of a shelf company is, thus, allowed to run it straight away. The procedure typically involves the assignment of ownership and the change of all business information, such as directors, shareholders, and company name, should this be desired.
New Company Setup: Building From Scratch
On the other hand, starting a company from scratch gives:
Complete Customization: You take control of the business name, structure, and operations.
Transparency and Fresh Start: There is no history of activities, leaving a clean slate for your business.
Branding Flexibility: A well-defined identity with which to conduct operations gives you the chance to create an identity to “suit” the corporate vision and goals.
However, registering a new company is somewhat cumbersome given the prerequisites put in place by law; you will have to acquire various licenses and permits and submit copious amounts of paperwork. This can severely delay the commencement of activities.
Key Considerations: Which One Is Suitable For Your Business?
The choice between a shelf company and a new company depends naturally on the individual business needs and peculiarities.
Time Constraints: A shelf company may come in handy if one needs to set up a business for a specific project, contract, or international expansion.
Trade Requirements: For certain industries or projects, more favour is shown towards companies with established histories; thus, the shelf company has an edge here.
Cost and Customization: New company formation can usually be cheaper and more adjustable. Meanwhile, a shelf company will require a relatively higher amount of money for a ready-made entity and historical existence.
Legal and Compliance Considerations: Ensure that the shelf company you are purchasing conforms with legal requirements without hidden liabilities.
When To Use a Shelf Company
The need for immediate incorporation: When urgent incorporation is sought, for example, to meet an impending deadline to begin a project or comply with a legal requirement.
Gaining respect: For industries in which the age of a firm matters to the clients or business partners.
Bureaucratic ease: If you are entering a new market wherein incorporation is impeded by red tape, a shelf company could allow you to bypass that hassle.
Conclusion
Compound shelf companies and new business setup differ quite immensely, and this contrast adds up to your business objectives to determine which is the most beneficial option. A shelf company may be the best alternative if speed, credibility, and ease of entry into the market are your main concerns. On the other hand, if it is customization and starting afresh, you may look at setting up a new company altogether.
If you need expert advice and assistance in deciding, you may contact the services of RAS Corporate Advisors. They are there to assist you with any queries, whether you are looking to acquire a shelf company or incorporate a new entity, in making the right decision to set business goals.