How do you guys use "shelf corporations"?

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paparoach429
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How do you guys use "shelf corporations"?

Postby paparoach429 » Tue Mar 10, 2015 3:04 am

A friend of mine told me that if I was to buy a "shelf corporation" I could get business credit. How does this work? The company he works for says that there is no income verification and no collateral required. Technically I do have some ownership in a business. My sister owns a business and had some tough times a few years ago. I borrowed her some money and on agreement have some equity in the company. I don't have a way to prove that though, that's why I'm not going to use it. On these shelf corporations, being that there's would be no income attached to it, do I still have to file taxes on it?


Brad Bishop
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Postby Brad Bishop » Tue Mar 10, 2015 7:10 am

You can always incorporate, if that's what you mean. You can either spend the time trying to figure out which forms need to be filed with various agencies or pay a lawyer $1000 to do it.

You'll need to get an Employer Identification Number (and file the stupid quarterly forms) from the IRS.

Then you can go to a bank and open up a business checking account or apply online for a business credit card. You're still responsible for it and I don't think that if you have crappy credit that they'll look past that for you're 0-income business.

I'm not really sure what the benefit of doing this would be with a business credit card.

You should only incorporate if you are trying to set up a business or you think you may be paid as a contractor and want to float it through your own company for tax reasons (talk to your accountant). I have a corporation that I set up a few years back and things sort of fell through on it but I still file the quarterly forms (earned $0 all the way down the list) and keep it around just in case someone wants to pay me in that fashion.

I don't have a business credit card on it because the expenses for it are pretty low (annual registration fees and a PO Box). If you did have a business credit card then you'd want the business to be generating some kind of income to offset it. Basically, you wouldn't want to use the business credit card for personal items and, if your business isn't earning any money, you don't want to show year after year of losses and writing all of that off because eventually the IRS will figure out your scam.

Anyway, it seems like a lot of work just to obtain a business credit card from someone. If you do go this route, though, consult an accountant and a lawyer.

paparoach429
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Postby paparoach429 » Wed Mar 11, 2015 1:45 am

What scam? All I am asking is if the shelf corporation makes $0 do I have to file taxes on it? I would assume not since there's nothing to file. I'm sure every state is different though. As stated in my other thread, I often come across things I either want personally or want to buy for resale but coincidentally never have the cash on hand for it. (motorcycles, cars, coins, houses). I would be able to use a personal line of credit but business lines generally have bigger credit lines and I'm sure they look better on a credit report.

takeshi
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Postby takeshi » Wed Mar 11, 2015 9:18 am

I don't. You don't even need one to apply for a number of business cards. Don't just assume that business lines are bigger. Business credit typically doesn't report on personal credit unless delinquent and personally guaranteed.

woogs
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Postby woogs » Fri Mar 13, 2015 10:29 am

Do you need to file taxes?

That depends on your state. In some states, you have to file (and pay a yearly fee) even if the business has $0 in revenue. I believe in California that fee is $800 / year for a LLC, not sure about Inc. As for Pennsylvania where I am, I have to file forms every year ( RCT-101, Schedule L) every year, even if I have $0 in sales.

Is this a true business line of credit?

Probably not. You are still tied to it personally and responsible for it. Don't think you can signup and walk away with no liability. Unless you are a large business with a proven history (filed taxes, income, etc.), you are not going to get a "true" corporate card that comes without you being personally liable.
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