Shell Corporation

A business that is formed with no actual business dealings

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What is a Shell Corporation?

A shell corporation is a business that is formed that has no actual business operations. They are mostly created for money laundering or sometimes for parking early startup funds. They do not employ anyone or provide any services.

Shell corporations are created in tax havens to avoid paying taxes and to hide the identity of the owner. If an individual is involved in an illegal activity, a shell corporation can be a platform to hide money. A shell corporation can be opened by opening a bank account and buying real estate in a tax haven.

Shell Corporation


  • A shell corporation is a company set up by an individual, typically to evade taxes or to hide money from the authorities or business partners. Over the years, shell corporations have also been used to launder money.
  • Tax havens help companies to pay lower taxes, thus increasing their profit margins and help them to gain access to foreign assets.
  • Shell corporations can also attract criminal investigations.

Here are some of the most common tax havens:

  1. Switzerland
  2. Cayman Islands
  3. The British Virgin Islands
  4. Bermuda
  5. Jersey
  6. Luxembourg
  7. Bahamas
  8. Delaware and Nevada in the U.S.

How to Set Up a Shell Corporation

A shell corporation is technically not illegal. It becomes a criminal organization when it is used for money laundering or other illegal activities. Despite being famous for helping the rich and famous evade taxes, it is very easy to set up.

Here are the steps:

  1. Find a shell corporation.
  2. Once the entity is selected, select the name of the company and a tax haven to set up the company. The British Virgin Islands is the cheapest country to set up a shell corporation – the cost can be between $1,500 and $2,000.
  3. Since it is created to hide the owner’s identity, a director must be named. He/She will have no actual power, but the name must be on the company’s paperwork.
  4. The individual must submit his/her proof of identification, like a passport copy.

Pros and Cons of Shell Corporations


  1. A shell corporation can help an individual to avoid paying taxes and gain access to new markets.
  2. It can help an individual to gain access to foreign stocks and exchanges.
  3. It helps an individual to avoid lawsuits, especially if the country is protected from the U.S.
  4. It can protect the owners’ identity, especially if the investor wants to avoid scrutiny from the local authorities of their country.


  1. It can be a risky choice for a company. Once caught, it damages credibility and potential for future business.
  2. Owning a shell corporation to avoid paying taxes can lead to criminal investigations from the country where taxes are owed.
  3. Trying to hide assets from the government’s eye can be very expensive.

Panama Paper Leaks

Mossack Fonseca, a Panamanian law firm, saw its 11.5 million clients leaked to the world. The client list included influential and famous individuals of various countries with money saved in different offshore tax havens. Of the 143 politicians named, 12 were national leaders like Vladimir Putin of Russia, Nawaz Sharif of Pakistan, Ayad Allawi of Iraq, Petro Poroshenko of Ukraine, and Sigmundur Davíð Gunnlaugsson of Iceland.

The leak led to several investigations by regulatory authorities and the resignation of board members of various companies and politicians.

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