Reason of Existence
Few inventory companies used to have processes, but the operation might have minimized because of some adverse market scenarios or organizational negligence. A company might also turn into an inventory company when the company is acquired or is winding up its business processes, but the blueprint or the “shell” did not cease to exist.
It's very important to comprehend that although inventory organizations are not illegal they do not fit in the description of a business corporation.
A shell corporation is an entity established to assist larger corporations to accomplish their specified missions or goals.
Exploitation of Shell Companies
They are being used many times for fraudulent activities by creating non operating shell corporations by the name of similar larger corporations for tax avoidance. Management runs the company at a very minimal price and then sells the corporation at a higher bid. This is an illegal procedure.
They are majorly used as a disguise for tax avoidance by showcasing shell companies as the real entities so that the operating cost and the tax levied upon can be considerably lowered.
However the actual operations of a shell company within the prescribed legal boundaries are generally for the purpose of outsourcing processes. They are also set up for the purpose of raising funds for start-ups or for the purpose of takeover.
Inventory companies can be put to great uses if regulated within the legal bounds and can be used as a great way for outsourcing operations abroad.
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