Heads Up: Know Who You’re Dealing with in Business

A “shell” corporation is a company which serves as a vehicle for business transactions without itself having any significant assets or operations. Shell corporations are not in themselves illegal, and they do have legitimate business purposes. However, they are a main component of the underground economy, especially those based in tax havens. They may also be known as international business companies, personal investment companies, front companies, or “mailbox” companies.

A close cousin of the shell corporation is the “dummy” corporation, which is an entity created to serve as a front or cover for one or more companies. It can have the appearance of being real (logo, website, and sometimes employing actual staff such as for public relations), but lacks the capacity to function independently. The goal of a dummy corporation can be to conceal true ownership and/or avoid taxes. A dummy corporation is one way to cook the books in a dishonest attempt to hide the true financial status of a company. Another use is to prevent speculators from interfering with the holding organization’s plans.

Economic developers have seen their fair share of both shell and dummy companies, whose investors seek to bilk local officials out of millions of dollars in grants, tax abatements, loans, and other financial incentives. Here is an example that involves some Ohio businessmen trying to pull a fast one in Virginia, who were indicated on another felony charge in Ohio. Read the story here.

According to a recent article on vice.com, one of the simplest ways to crack down on ​organized crime and money laundering, most cops or FBI agents will tell you, is to make it harder for crooks to ​create so-called shell companies. These firms—typically set up in an offshore haven by the crook’s attorney or bagman—are designed to hide the identity of their real owners and allow people to move money around the world without it being traced back to them.

Interested in learning more about this topic. Click here and download by Global Witness, which recently was publicized by Ted Talks: The Great Rip Off_0

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