There is a plethora of major concerns when starting a brand new business. From filling out all of the appropriate paperwork and forms to establishing a formal, legal presence, this can be a huge detractor for individuals and entrepreneurs seeking to start a new venture.
An increasing number of self-motivated businesspeople are finding new ways to take advantage of the system through legal means and avoid all of these hassles. Especially true for those new to the world of business legalese, skipping some of the technical steps to forming your own business sounds like a great idea.
Shelf companies are one such option for those wanting to start a business but who don’t want to deal with extra hurdles. Below, we’ll talk about why a shelf company can be a great choice for those just starting their new businesses.
What Is a Shelf Company?
Before you can decide whether a shelf company is the right choice for your needs, you need to understand what it constitutes.
In short, a shelf company is a business that has been created on paper in all required aspects but has not actually been used for any formal business endeavours. This means that all of the incorporation has been handled and kept up-to-date, but that no actual activity on the part of the business has occurred.
Many people compare shelf companies to bottled wine; the term “shelf company” originates from the act of bottling wine and leaving it on the shelf to age. Unlike fine wine, however, many wonder what is the benefit of creating a company on paper and allowing it to sit unused.
Why exactly would somebody consider a shelf company as a solution when starting their own business?
An Easier Incorporation Process
People who are ready to start their own businesses may not initially understand the difficulties that come with the task. Besides worrying about where to raise capital, how to procure or manufacture products and who to hire, it’s a major ordeal just to set up the business entity itself.
According to CFS Formations, an increasing number of individuals are seeking shelf companies as one way to streamline the incorporation process. Rather than deal with the paperwork of setting a business up, purchasing a shelf company can be a much quicker and simpler way to get any business off the ground.
Access to Bidding Processes
Some business models focus on providing services to both public and private vendors. In order to bid on these contracts, some companies require that a business that is bidding be an established entity for a minimum period of time. Choosing to use a shelf company instead of a newly-formed company will provide businesses with immediate access to these bidding processes and contracts.
Because the shelf company has been in good standing and meets the minimum requirements for such qualifications, it helps circumvent the waiting process for these contracts.
Potential Investor Benefits
Businesses with a proven record of existence are more likely to attract capital than newly-formed businesses. For this reason, a shelf company can be quite useful in attracting and convincing investors to provide your company with capital.
While it doesn’t automatically guarantee a higher rate of success, many investors will look at the age of the company as one of the metrics when deciding whether to invest. If you can prove that your company has existed for several years – or even longer – then you can present that to potential investors as one of many selling points.
Increased Access to Credit
Every business finds itself in a position where it needs to borrow money from banks or financial institutions. There are many metrics that lenders evaluate when deciding whether to lend; the age of a company is one of those important metrics.
Much like with the bidding process, some lines of credit and various loans are not available to newer businesses. If you opt for a more established shelf company – one that is at least five years old – then you’ll stand a better chance at being approved for the loans necessary to grow, start or expand your business.
Better Consumer Rapport
When customers and consumers want to do business with a particular brand, they often head to the internet. In many cases, a shelf company will not have any user reviews or comparable content online. However, records from a variety of organisations that assess business quality, consumer complaints and company longevity will show that your business is not some fly-by-night, newly-chartered company.
This can help provide confidence to consumers – especially in the service sector – that they are not making a mistake by using your company for their needs.
Shelf companies provide a variety of potential benefits to upstart businesses seeking to incorporate. At minimum, these entities can make the incorporation process far easier than usual. Additionally, they can also provide better access to contracts, finance and consumer confidence for business models that may require all three in spades at launch.