Shell corporation

A shell corporation is a company which serves as a vehicle for business transactions without itself having any significant assets or operations. Some shell companies may have had operations, but those may have shrunk due to unfavorable market conditions or company mismanagement. A shell corporation may also arise when a company's operations have been wound up, for example following a takeover, but the “shell” of the original company continues to exist.

Shell corporations are not in themselves illegal, and they do have legitimate business purposes. However, they are a main component of the underground economy, especially those based in tax havens. They may also be known as international business companies, personal investment companies, front companies, or "mailbox" companies.

Shell companies can also be used for tax avoidance. A classic tax avoidance operation is based on the buying and selling through tax haven shell companies to disguise true profits. The firm does its international operations through this shell corporation, thus not having to report to its country the sums involved, avoiding any taxes.