Estab­lish­ment of a new com­pany vs. shelf com­pany

Start­ing a busi­ness is a sig­ni­fic­ant step and presents a num­ber of chal­lenges for any bud­ding entre­pren­eur. One of the first con­sid­er­a­tions con­cerns the way in which the com­pany is to be launched. There are two options to choose from: a tra­di­tional start-up or the acquis­i­tion of a shelf com­pany. Both meth­ods have their advant­ages and dis­ad­vant­ages, but espe­cially in today’s fast-paced busi­ness world, a shelf com­pany can be an attract­ive altern­at­ive to the time-con­sum­ing and nerve-wrack­ing pro­cess of found­ing a new com­pany. In this art­icle, we com­pare the two approaches and explain why the shelf com­pany is often the bet­ter choice.

What is a shelf com­pany?

A shelf com­pany is a com­pany that has already been estab­lished but is not yet oper­a­tional and is offered for sale by spe­cial­ised pro­viders. These com­pan­ies are fully leg­ally con­sti­tuted, entered in the com­mer­cial register and ready to be put into oper­a­tion imme­di­ately. They are often lim­ited liab­il­ity com­pan­ies (GmbH) or pub­lic lim­ited com­pan­ies (AG) that are simply wait­ing to be taken over by a new owner.

Advant­ages of the shelf com­pany

1. Sig­ni­fic­ant time sav­ingsThe biggest advant­age of a shelf com­pany is prob­ably the con­sid­er­able amount of time it saves. While it can take sev­eral weeks to months to set up a new com­pany — from pre­par­ing the incor­por­a­tion doc­u­ments, not­ar­isa­tion, entry in the com­mer­cial register to open­ing a busi­ness account — a shelf com­pany is ready for imme­di­ate use. For entre­pren­eurs who need to act quickly to cap­it­al­ise on a busi­ness oppor­tun­ity, this time sav­ing is invalu­able.
2. Imme­di­ate abil­ity to actWith the acquis­i­tion of a shelf com­pany, busi­ness can begin imme­di­ately after the pur­chase. As all bur­eau­cratic hurdles have already been over­come, noth­ing stands in the way of the oper­a­tional start. This is par­tic­u­larly advant­age­ous if busi­ness oppor­tun­it­ies arise at short notice or if the mar­ket requires the com­pany to take action without delay.
3. Less bur­eau­cratic effortFound­ing a new com­pany can involve a lot of bur­eau­cracy. Start­ing with the pre­par­a­tion of the art­icles of asso­ci­ation, through coordin­a­tion with the not­ary, to the lengthy wait­ing period for entry in the com­mer­cial register — all this costs time and nerves. With a shelf com­pany, this entire form­a­tion pro­cess is elim­in­ated as everything is already pre­pared. The entre­pren­eur can con­cen­trate fully on busi­ness suc­cess instead of deal­ing with paper­work.
4. Pro­fes­sional and estab­lished appear­anceAnother advant­age of the shelf com­pany is that it is already entered in the com­mer­cial register and there­fore gives an estab­lished and pro­fes­sional impres­sion right from the start. This can be par­tic­u­larly help­ful if the com­pany wants to start doing busi­ness with part­ners or cus­tom­ers imme­di­ately. A com­pany that is already registered looks more trust­worthy and reput­able than a brand new com­pany that is still in the pro­cess of being foun­ded.
5. Facil­it­ated lend­ingBanks and lenders are often more cau­tious when it comes to grant­ing loans to a newly estab­lished com­pany, as the risk of default is con­sidered to be higher. On the other hand, a shelf com­pany that has been in exist­ence for some time — even if it has not been act­ive — can be an advant­age when it comes to lend­ing. The cred­it­wor­thi­ness of a shelf com­pany is often seen as more stable, which can facil­it­ate access to fin­an­cing.

Dis­ad­vant­ages of found­ing a new com­pany

1. Long wait­ing timesAs already men­tioned, set­ting up a new com­pany is a pro­cess that takes a long time. It can take weeks or even months from the draft­ing of the art­icles of asso­ci­ation to the final regis­tra­tion. These wait­ing times can mean that busi­ness oppor­tun­it­ies remain unreal­ised or the start of the com­pany is unne­ces­sar­ily delayed.
2. Com­plex­ity and bur­eau­cracyStart­ing a busi­ness involves a large num­ber of bur­eau­cratic require­ments. Coordin­at­ing with vari­ous insti­tu­tions, obtain­ing author­isa­tions and ful­filling legal require­ments can quickly become a chal­lenge. This is a con­sid­er­able dis­ad­vant­age, espe­cially for entre­pren­eurs who want to con­cen­trate on their busi­ness idea.
3. Increased risk of errorsWhen set­ting up a new com­pany, it is easy to make mis­takes, be it when draw­ing up the art­icles of asso­ci­ation, choos­ing the right legal form or com­ply­ing with legal require­ments. These mis­takes can be costly and fur­ther delay the start of the com­pany.

Con­clu­sion

For many entre­pren­eurs, the Vor­rats-GmbH or Vor­rats-UG is an altern­at­ive worth con­sid­er­ing to the clas­sic form­a­tion of a new com­pany. The con­sid­er­able advant­ages — in par­tic­u­lar the time sav­ings, the abil­ity to act imme­di­ately and the reduced bur­eau­cratic effort — make it an attract­ive option, espe­cially in an envir­on­ment where speed and flex­ib­il­ity can be cru­cial. Whilst the new com­pany form­a­tion has its mer­its, espe­cially when spe­cific require­ments are placed on the com­pany, the shelf com­pany is an excel­lent choice for any­one who wants to enter the busi­ness world quickly and effi­ciently.

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