How To Start A Shell Company

Why risk exposing yourself (and your assets)?

A shell company can streamline your real estate investments while minimizing this exposure.

Your shell company is your face to the world, it’s the one that we want people to come after if there’s ever a lawsuit. Think of it as a legal decoy. It shouldn’t offer products or services, hire employees, or generate revenue.

Most investors find the Traditional LLC works just fine for a shell company to perform real estate functions like collecting rent, paying property management, etc. But you’ll also need an asset-holding company for your properties. We recommend the Series LLC if you’ve got more than one property—it’s a cost-effective, scalable way to compartmentalize your assets. 

When it comes time to set up your asset protection plan, always think: assets on one hand; complete anonymity, separation and operations on the other. The Series LLC is your asset-holding company; your shell company handles operations.

Why Start A Shell Company?

Shell companies are used by large public corporations and everyday mom-and-pop investors. Beyond compartmentalizing assets to help fend off potential lawsuits, shell companies serve a number of other purposes. These include:

  • Temporarily holding assets or funds
  • Investing abroad
  • Protecting assets
  • Securing better financing arrangements
  • Creating financial privacy
  • Hostile takeovers
  • Access to different real estate markets

Shell companies can give real estate investors access to different kinds of financing and can provide access to jurisdictions with friendlier tax rules. They may also help with a few other niche paperwork challenges. Those kinds of shell companies are sometimes referred to as “mailbox companies” or “letter-box corporations.”

One of the biggest advantages of shell companies is that they can be made to be anonymous. It all comes down to knowing how to hide ownership of a company.

You can mask ownership of a shell company by hiring a nominee director to file the paperwork under their own name. This is a simple and highly recommended step if your goal is privacy. You will maintain actual ownership of the company, but their name will appear on all company records.

If you want to take anonymity one step further, you can have the shell company registered as a subsidiary of another shell company. The repeated layering of shell companies can become a hassle, but it will certainly provide greater anonymity and protection.

What You Need To Start A Shell Company

How To Start A Shell Company: seashells on beach

Going offshore to start your own shell company isn’t as hard as you may think. You will typically need to provide:

  • Applicable fees
  • Articles of association/incorporation
  • ID (normally a passport)
  • Proof of residence
  • Registration forms

There may be additional items required in your shell company’s jurisdiction.

Shell companies can typically be registered online or by mail, or sometimes by phone. You will have to pay the necessary fees, which normally range from a few hundred to a few thousand dollars.

You may need someone to guide you through the process. Registered agents can help. They will file all the paperwork and send all the fees on behalf of your new company.

You will need to submit personal information to register your shell company. The registered agent and beneficial owner are the parties whose identity must be submitted.

Where To Start A Shell Company

There are many locations where you can set up your shell company. But some jurisdictions make it far easier than others. Some of the most popular locations are:

  • Bahamas
  • Bermuda
  • The British Virgin Islands
  • Cayman Islands
  • Luxembourg
  • Switzerland
  • USA (States with lax requirements and greater privacy protections)
  • Delaware
  • Nevada
  • Wyoming

Your choice of location may come with its own company naming restrictions. Make sure your company name is in line with local requirements. Note: public records in the Cayman Islands do not even reveal the names of a shell company’s registered agent.

Compliance and Ethical Considerations

There’s nothing inherently illegal about owning a shell company. There are also several great reasons to start one, as we’ve covered.

But shell companies have certainly been used for illegal activities, such as:

  • Money laundering
  • Illegal tax evasion
  • Illicit business activities
  • Hiding assets from a spouse during divorce proceedings (this may be considered fraud)

If you’re unsure whether a shell company is the right choice for you, it makes sense to talk to a lawyer. A lawyer can help you go over your options and ensure every step is completed in compliance with the law. That way you can quickly and safely have your exact needs met.

 

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