When they decide to open a business in a new location, investors can either incorporate a new company or buy an already existing one. While the type of legal entity can be exactly the same, a number of characteristics will differ between the new company and the shelf company and investors can make their choice based on what suits their needs best.
New company vs. shelf company
The table below presents several of the main traits of both the shelf company and the new company.
|Trait||New Company||Shelf Company|
|Customization||A new company is incorporated exactly as per the wishes and the decisions of the investor/s. The business entity type, the name of the company, the types of shares and others are chosen by the founders.||Its particularities are already defined, from the business form to the business name; additional changes are possible although they will imply specific costs and procedures.|
|Banking||Will need a bank account after incorporation. The share capital will also be deposited in the said account.||It is usually not sold with a bank account; this step will take place after the ownership transfer.|
|Costs||Include the costs for the minimum share capital, the legal fees, notary costs, registration fees and others.||Include the costs to buy the company and the fees for the subsequent transfer and changes with the Registry.|
|Business commencement speed||Is able to commence the business activities only after it is registered. The minimum incorporation time depends on the chosen jurisdiction.||Can commence the business activities immediately, but it is owned by the new entrepreneur only after the transfer is complete.|
The choice between a new company and a shelf company can also be location-specific. Entrepreneurs can choose to buy a shelf company in Ireland if they wish to start their business activities as soon as possible.
Different issues to consider
In most cases, entrepreneurs will choose to buy a ready-made company if they wish to save the time that would be used to incorporate the new company. This is an important advantage, however, it should be carefully taken into consideration especially because the shelf company needs to be verified before the purchase is made.
A shelf company in Hong Kong or in any other jurisdiction can be useful for those investors who need a company number instantly. In all other cases, a thorough comparison should be made between the costs and the time needed to set up a new company as opposed to buying an already registered one.