Incorporating a GmbH takes a lot of time and confidence. However, there is another alternative for entrepreneurs who want to get started with their business as quickly and easily as possible: shelf companies. In this article, find out what a shelf company is, their advantages and disadvantages, and the costs involved in purchasing a shelf GmbH. We will also explain how to buy a shelf GmbH and when buying one is especially worthwhile.

What’s in this article?

• What is a shelf company?
  
• What are the advantages and disadvantages of a shelf company?
  
• What does a shelf company cost?
  
• What are the risks associated with buying a shelf GmbH?
  
• How to buy a shelf GmbH
  
• When is it worth buying a shelf GmbH?
  

What is a shelf company?

A shelf company is an “empty” business that has already been fully set up for the purpose of being sold. All the bureaucratic steps involved in setting up a business have already been completed—including entry into the commercial register, trade registration and registration with the tax office and chambers of trade. With a shelf company, the necessary share capital has already been deposited—however, the business has no assets. Until they are sold, shelf companies only exist on paper as they do not carry out any business activities. Shelf companies of nearly every common legal form can be established “in reserve” by specialist businesses, law firms, or notaries—including AG, GmbH, UG (haftungsbeschränkt), limited partnership, and international legal forms such as the Societas Europaea (SE).

Shelf companies must be clearly distinct from shell companies. Shell companies are already operational, while a shelf company is starting its business activities. The activities of the shell company have ended and the “shell” of the business is for sale. Due to having been in operation in the past, legacy assets may also be acquired when purchasing a shell company. However, on the upside, buyers can benefit from a high credit rating, a good reputation, and existing relationships with customers of the shell company.

What are the advantages and disadvantages of a shelf company?

Buying a shelf company is the fastest way for entrepreneurs to acquire a fully formed business with all the necessary founding formalities already completed. The transfer takes place in only a few days, and in some cases within 24 hours. There are no visits to the authorities or waiting times. This saves several weeks and minimizes bureaucracy. The only obligation is to have the business registered with a notary.

Another advantage is that differential liability does not apply. The limitation of liability of a GmbH takes effect once the business is entered in the commercial register. If the business is commercially active in the weeks after the initial application and before the actual registration, the owners are personally liable. With a shelf GmbH, this risk does not exist as it is already registered in the commercial register.

In addition, when buying a shelf company, there is no possibility that legacy liabilities or other obligations will also be acquired. As the business was not active previously, there is no way it could have incurred any debts that the new owners would have to settle.

Since acquiring a shelf company is considered the same as setting up a new business, you can apply for funding for founders.

All these advantages come with one disadvantage, however: the service fee paid to the seller. So, whether the advantages of a shelf company justify the additional costs has to be weighed in each individual case.

What does a shelf company cost?

The purchase price of a shelf company comprises three amounts: a service fee for the seller, the costs of the transfer, and the deposited share capital. For the first two amounts, expect to pay between €1,500 and €3,500. The share capital depends on the legal form of the business. For a GmbH, a total of at least €28,000 (a €25,000 share capital for the GmbH plus the service and transfer fees) would be required. Untrustworthy providers can be quickly identified if the total price quoted is lower than the share capital required for the legal form of business in question.

What are the risks associated with buying a shelf GmbH?

Alongside several reputable providers there are some that are less trustworthy. The biggest risk would therefore be buying a shelf company from a questionable source. In some cases, shell companies are sold as shelf companies. If these still have legacy liabilities, the buyer will be liable for them. So, it’s recommended to check the provider carefully and gather information from unbiased sources, such as review websites. If you want to be very safe, you can buy a shelf GmbH directly from a notary.

The shelf company should be entered in the commercial register of the registration court in the location where the buyer wants the business to be located. For example, if the business was entered into the commercial register in Munich but is located in Hamburg, this could require time-consuming reregistrations or new registrations. However, there is the option of leaving the registered office unchanged and updating only the business address.

It makes no difference to its actual business activities whether a GmbH is newly founded or purchased as a shelf company. There are no expected additional risks on this front.

How to buy a shelf GmbH

Buying a shelf GmbH is a quick and easy process involving just a few steps:

• Find a provider: Shelf companies are available from many different providers—including specialist businesses and agencies, law firms, and notaries. Most of them are online and are easy to find using a search engine with the keywords “buy shelf company.” You should pay attention to the trustworthiness of the provider, both on the website and when making personal contact. It is also advisable to check a neutral online platform.
  
• Reserve a business: The second step is to submit a request to reserve a shelf GmbH to the provider of your choice. Usually, specific offers are advertised on the providers’ websites, including important information and a fixed price.
  
• Check the documents: Once the provider confirms the reservation, you will receive a preliminary contract and initial documents relating to the shelf company—such as the certificate of incorporation or the notification of entry in the commercial register. You should check all the documents carefully.
  
• Pay the purchase price: To complete the purchase, transfer the purchase price owed plus the service fees. The GmbH is then transferred.
  
• Make changes: As part of the transfer, it is possible to amend the articles of association and other details of the GmbH. For example, you can change the name of the business. The sellers often help with this.
  
• Have changes notarized: Have any changes finalized and notarized by a notary. This also includes changing the entry in the commercial register.
  

To complete the purchase quickly and get started with your GmbH, you should have some documents and information available ahead of time—for example, valid ID, tax ID, business name and purpose, new business address and, if necessary, articles of association.

When is it worth buying a shelf GmbH?

The circumstances in each individual case need to be ascertained before deciding whether to buy a shelf GmbH, a shell company, or found a new business. The advantages and disadvantages must be weighed under the respective circumstances.

In principle, the process of setting up a business can be very instructive for new entrepreneurs, even if it does involve a lot of bureaucracy. Setting up a new business should therefore always be the first option you consider. However, this requires that the founders are not in a hurry. If things need to be done in just a few weeks and business activities need to start as soon as possible, shelf and shell companies are worth considering: the advantage of saving time is offset by the cost of both options.

In general, buying a GmbH in Germany can make it easier for foreign entrepreneurs to get started. This is because they may not be able to open an account with a German bank, especially if they come from a high-risk country. This can cause difficulties, as it is a prerequisite for paying in the required share capital. When purchasing a GmbH, the buyer simply takes over the existing business account.

When comparing the shell company to the shelf company in particular, the shelf company is a blank slate and there is no risk of taking on inherited liabilities. However, a shell company does not always mean inheriting problems, as the opposite can also be the case: if the buyer chooses carefully, they might be able to benefit from buying a shell company with a good reputation and existing contacts and balance sheets.

In addition, there is one specific case where buying a shelf company is preferable to buying a shell company: an established business that wants to spin off a project or a line of business during ongoing business activities. In this scenario, the established business purchases a shelf company to execute this new line of business. By doing things this way, for example, a new, high-risk idea can be explored without affecting the core business.

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