Shell Companies

What is a Shell Company?

• Definition: a company with no significant assets or operations
• Legal entity that exists primarily on paper
• Used as a vehicle for various financial transactions

On-Shore Shell Companies

• Domestic shell companies (e.g., Delaware LLCs, Nevada corporations)
• Why Delaware is popular:
  • TODO: explain Delaware's corporate-friendly laws
  • TODO: explain privacy protections
• Examples of legitimate on-shore use:
  • TODO: holding companies
  • TODO: real estate ownership
  • TODO: liability separation

Off-Shore Shell Companies

• Common jurisdictions:
  • TODO: Cayman Islands
  • TODO: British Virgin Islands
  • TODO: Panama
  • TODO: Switzerland
• Why companies choose offshore:
  • TODO: tax advantages
  • TODO: privacy/anonymity
  • TODO: regulatory flexibility

How Taxation Works

• On-shore taxation:

  • TODO: pass-through taxation (LLCs)
  • TODO: corporate taxation
  • TODO: state-level considerations

• Off-shore taxation:

  • TODO: tax havens and zero-tax jurisdictions
  • TODO: transfer pricing
  • TODO: GILTI and other anti-avoidance rules
  • TODO: FATCA reporting requirements

Legitimate vs Illegitimate Uses

Legitimate Uses

• Asset protection
• Privacy for high-net-worth individuals
• Holding intellectual property
• International business operations
• Estate planning

Red Flags / Illegitimate Uses

• Money laundering
• Tax evasion (vs tax avoidance)
• Hiding beneficial ownership
• Sanctions evasion

The Panama Papers (2016)

• TODO: overview of the leak
• TODO: what it revealed about shell company usage
• TODO: regulatory changes that followed

References

• TODO: Add references