Downsides to setting up shell companies for sale?


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I see plenty of shell companies for sale through reputable sellers: LLCs that have no tax ID number or bank account and that were established a few months to a few years ago. The market prices of them seem to be double what the costs of setting them up and keeping them running would be.

I'm a lawyer and regularly set up LLCs for clients, and so I'm thinking that this could be a good small side business.

Why in the world, though, would someone pay $500 to a few thousand dollars more to buy an existing LLC compared to just setting one up? What am I missing; are there any downsides, other than being stuck with a company that nobody wants to buy?

Thanks.

LLC Company Shell

asked Nov 3 '12 at 23:30
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User6492
1,747 points
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2 Answers


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Sometimes creditors ask when the company was established, to "guess" how long it has survived. But without a corresponding D&B report, I doubt it has any value. More likely, its successful marketing and sales pitches, rather than a real need answered. The only reasonable need it can answer is when a client needs a company ASAP and can't wait for the State bureaucracy to do its thing.

If as a lawyer you can't see a real reason for this, then there's probably no real reason. But some people may be fooled more easily than others, and if you're in the business of dealing with people who can be fooled easily - that could indeed be some extra income for you.

Keep in mind that there are also extra expenses (depending on the state, you need to pay certain yearly fees to maintain the entity, in CA it may be quite steep $800/year), so if you keep too many of those for too long - you'll end up losing money.

So if you do occasionally have clients that need companies today and can't wait - you can setup a couple ahead of time, just for these cases, and charge extra (but less than the State expedite processing fees, otherwise it won't be worth it). Otherwise - I doubt its useful to anyone.

answered Nov 4 '12 at 04:25
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Littleadv
5,090 points
  • Oh, and as usual - if you downvote without explanation, it describes you much more than it describes the answer. – Littleadv 9 years ago

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It can take years of being in business to get a credit line not tied to your personal finances.

But suppose it takes 5 years to get good credit. Well that is $4,000 of paying CA's minimun tax plus the Statement of Info etc... Is someone going to pay more than $4,000 for the shell? Who knows, but it sounds unlikely.

There is also pairing the company name with some domain registrations. So people can get the website they want with the company name.

answered Jul 20 '13 at 10:30
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Edward
1 point

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LLC Company Shell