Commentary: Shell Companies Sometimes Viewed Overly Harshly

Commentary: Shell Companies Sometimes Viewed Overly Harshly

Keep an open mind.

That is the plea of a couple commentators who recently penned an article for a national publication on so-called “shell” companies that occasionally get a bit of high-profile attention in the media.

As many of our readers across Arizona will readily note, that spotlight is often adverse and glaring, with such entities often being perceived as corporate vehicles used by business actors for clandestine and illicit purposes.

Think recently of the Panama Papers, the story chronicling shell companies established for many individuals and businesses across the world. When many people hear any reference to shell companies, they often think, as noted in the above-cited media report, that they are “only for money launderers and tax cheats.”

And that is simply not the case. As the Accounting Today piece states, shell companies — often called special-purpose companies or single-purpose entities — have been around for centuries and promote many valid business purposes.

Like simply getting things started, for example. It is noted that many fledgling businesses “start as a company on paper and nothing else.”

And privacy. It is certainly true that myriad businesses employ special-purpose companies to keep certain matters out of public purview. And while that might be for unlawful reasons in select cases involving bad-faith corporate actors, it is far more often the case that legitimacy attaches to such aims.

And for large business entities, it simply makes sense to fragment and decentralize certain business operations for reasons of simplicity, lawful tax avoidance, liability containment and a host of other lawful reasons.

“[B]e sensitive to the legitimacy of so-called shell companies and the rights of the honest to employ them” the commentators conclude.

Call Cook & Price, PLC today at 480-407-4440 or email us through this website.

2017-09-28T06:06:13-07:00 August 2nd, 2016|Categories: Business Litigation|

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