Buying a shelf company: Should I even bother?
January 7, 2016 11:39 PM   Subscribe

I'd like to know if there's any benefit to buying a shelf company in 2016, particularly if the goal is to build a solid credit history fast (if not immediately).

Is there any benefit to purchasing an existing, "pre-aged" shelf company nowadays? Google is giving me conflicting answers, which basically means it's failing me. And laws change all the time, loopholes eventually get covered, etc.

Long story short: A few years ago, me and my existing company didn't have the best of credit. Mistakes were made, debts were incurred, and our existing business credit (as well as personal credit) took a significant hit. Since then, our financial picture has changed drastically (for the better), but credit scores have yet to catch up. We are able to take on more debt than our personal and business credit scores would lead lenders to believe.

With that in mind, I'm tempted to purchase an out-of-state aged shelf company. However, many of them trumpet the fact that their aged companies have no TIN/EIN. That's great in one way — you are guaranteed not to inherit a former company's debts — but on the other hand, I was under the impression that while credit agencies appreciate a company with some longevity, they also want to run your credit (which requires a tax ID) and take a look at your history. So if that's true, then it seems to me that purchasing, say, a 15-year-old shelf company that I generated a tax ID for just last week is going to do me no good — in the eyes of the potential creditor I'm applying to, "my" company is only a week old, and thus, I've basically wasted my money on said shelf company.

So, am I wrong? Or do they in fact cut me any slack for the length of time that the company has been registered with the state? Am I better off just waiting it out, and letting my existing company's credit scores and ratings slowly creep their way back up from the gutter?
posted by CommonSense to Work & Money (3 answers total)
Best answer: Most investigations I've heard of regarding entities that do this sort of thing is that generally the practice is unethical, if not illegal in some cases, and many customers have come away feeling scammed.

Banks that are aware and smart regarding these sorts of strategies will have the resource and policy in place to ask you lots of questions about the history of the Company in their review. Specifically, why should they give a loan to a company that's had no realistic sales revenue or accounting or debt payments for the past 15 years.

It's likely that when you work with the entity selling the shelf company they will advise you to go to specific small time banks they know that take a blind eye to this or have absurdly low thresholds for transaction requirements, and on top of that advise you to ask for a loan under a specific amount such that you don't trigger further reviews.

You should consider whether you want to start your business on that foot.
posted by Karaage at 5:22 AM on January 8, 2016 [2 favorites]

Am I better off just waiting it out, and letting my existing company's credit scores and ratings slowly creep their way back up from the gutter?

How badly do you need additional credit?
posted by R a c h e l at 7:33 AM on January 8, 2016

Response by poster: How badly do you need additional credit?

Ehhh, not really that badly. Along with Karaage's reply, this is pretty much what I was thinking. Sounds like it's shady and not terribly ethical, and in the end, probably not particularly effective. Thanks!
posted by CommonSense at 11:59 AM on January 8, 2016

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