Don't Be Tempted by 'Shelf Corporations'

With revenues down and debt financing tougher to get than ever, it's not a stretch to imagine entrepreneurs being tempted toward desperate measures. One of those avenues could involve a vehicle called a "shelf corporation"—a corporation formed in a low-tax, low-regulation state expressly to be sold off for its pristine credit rating. Historically shelf corporations were considered a legitimate way to streamline a startup, but this attempt to sell them as vehicles to get around credit guidelines is fairly new, according to Nick Harycki, CEO of Swift Financial, a Wilmington (Del.) financial services company dedicated to small business banking. Doug Broten, president of the BBB of Central California, recently investigated a purveyor of shelf corporations and concluded that they are clearly unethical, and possibly illegal. He spoke with Smart Answers columnist Karen E. Klein about why small business owners should steer clear. Edited excerpts of their conversation follow.I've heard of a "shell corporation" but what's a "shelf corporation"?

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