A shell corporation, also known as a shell company or a shell entity, refers to a business organization that exists only on paper and has no physical presence, significant assets, or real business operations. It is typically established as a legal entity, such as a corporation or a limited liability company (LLC), with the sole purpose of hiding or facilitating illicit activities, financial schemes, or tax evasion.
Shell corporations are often used to create a veil of secrecy, allowing the individuals or groups behind them to act anonymously, shield their identities, or mask the true beneficiaries and owners of assets, funds, or properties. They serve as a front or an intermediary for conducting illegal activities or facilitating complex financial transactions. By forming a shell corporation, individuals can obscure the true origins of money, disguise shady practices, launder money, avoid taxes, or evade legal and regulatory scrutiny.
These entities usually lack substantial business activities, tangible assets, employees, or legitimate business operations other than holding nominal accounts, engaging in minimal transactions, or participating in dubious deals to maintain a semblance of legitimacy. Shell corporations may be registered in countries with favorable or lax corporate laws and regulations, allowing beneficial owners to enjoy certain advantages, such as ease of incorporation, minimal reporting requirements, or weaker oversight.
It is essential to distinguish between legitimate uses of shell companies, such as to hold assets for privacy or for legitimate business purposes, and the exploitation of such entities for illicit or fraudulent activities.
