Shelf Corporations: Your Gold Key to Financial Wealth

Did you ever wonder how successful investors like Donald Trump fund their multi-million (and sometimes billion!) dollar projects?  Certainly, they don't always have THAT much money in their savings account!  No, often they used something called a 'shelf corporation' (a.k.a., an 'aged corporation').

A shelf corporation is an entity that has had limited or no activity.  They are literally 'aged' and are often later sold to person(s) who want to start a company without going through all the procedures of creating a new one.  Below are some common reasons for buying a shelf corporation:

• To save the time involved in taking the steps to create a new corporation.
• To gain the opportunity to bid on contracts. Some jurisdictions require that a company be in business for a certain length of time to have this ability.
• To create an appearance of corporate longevity, which may boost investor or consumer confidence.
• To gain access to investment capital.
• To gain easier access to corporate credit.

For the average investor, having access to thousands of dollars, sometimes six or seven figures, opens up a bigger world in terms of freedom and leverage.

In the past, especially before the recession, shelf corporations could often get funded by banks with lines of credit solely based on their history, or hard assets owned by the entity.  However, now the banks usually won't fund a corporation without a solid 'personal guarantor' (or 'PG') - i.e., someone with outstanding credit that is made an officer of the corporation for the sole purpose of getting funding from banks.  Later, usually after a few months, the PG is removed legally from the corporation - because they have served their purpose and are no longer needed.  For their services, most PGs are paid a certain percentage of the funding from the investor/buyer of the corporation.