What is a shelf company?

Many entrepreneurs going into business for the first time will opt to buy a shelf company. A shelf company is a registered company is a corporation that’s formed and then “put on a shelf” where it will age for several years. The company doesn’t engage in real business and often has no real assets. You can effectively purchase the company. It’s a quick fix if you don’t want to go through the hassle of registering a business.

There are a few things to be mindful of:

  • The company’s Registered Office will be that of the company that formed it, you should ask them to change it or you will be charged for it
  • You can’t open a bank account until you are registered as the director
  • If you want to the change the name, it’s important to check that your choice will be allowed by the CIPC
  • You can change the name by using the “trading as X” name but don’t put (Pty) Ltd at the end

Be very wary when buying a shelf company with “established” credit or tax returns that offers you the shelf company at a low price to obtain business loans. These are usually not legitimate – and attempting to obtain credit in their name might be considered fraud.

Be sure to verify that the company selling the registration is the rightful owner – scamsters might sell the registration illegally, and the rightful owner can claim it back and prevent you from trading.

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