Shelf Corporations, Business Credit and Asset Protection

These 3 terms, 1. Shelf Corporations, 2. Business credit, and 3. Asset protections, have caused some unnecessary problems, and interesting decision making in the business credit world.

In the 6+ years I have been in the business credit industry, the majority of people that call for a Shelf Corporation have wanted a Nevada(in the beginning), Delaware or a Wyoming corporation to build credit with. Most people ask for Shelf Corps in these states because “they heard” or “someone told them” that these are the best states to purchase Shelf Corps. Let me clear a few things up now.

These three states have been preferred placed to purchase corporations(whether they are shelf corps or brand new ones) for privacy purposes. These heightened privacy measures usually help for hiding assets, or getting involved in fraud, while reducing the risk of getting caught. These advantages that were issued in these states seldom benefit business credit building. Even in some situations where clients request a Texas or Florida corporation for lowered taxes, most of these corporations are solely used for credit purposes, and they either never make any income or run at a loss, so these “tax advantages” never come into play.

The truth is, DnB and the creditors(banks) are not oblivious to these advantage. They may very well know much more about the advantages that various states offer to businesses than we do. DnB in particular has been keeping a close watch in Wyoming corporations.  After Yahoo’s article on Shelf Corporations that was published on June 28th, 2011 (click here), even if banks wanted to look the other way(as they did in the past), they couldn’t.

The bottom line is this. If you want a corporation in a specific state, you should know exactly why you want it. If you plan on buying a shelf corporation for the sole purpose of building business credit? It really should not matter which state you buy it in(other than saving money on purchasing the cheapest corporation).

I hope that I have cleared up a couple misunderstandings in this matter. Build business credit, and start NOW. Shelf corporations do help, but understand why and what you are getting into.

Marc Augustine