A shelf company in Latvia
is a legal entity that has been incorporated but has had no business activity. In a sense, as the name suggests, it has been “left on a shelf”. Investors in Latvia can choose to purchase a company when they need to same the time needed for the normal incorporation or when they need the company to be aged.
There are several reasons why investors might prefer an aged company and these can primarily refer to obtaining corporate bank loans and other credit options. In a broader sense, the age of the company can sometimes be synonym with its credibility and thus a shelf company will create a different business image for potential distributors, business partners, and other parties.
The characteristics of a shelf company in Latvia
The following list includes the main characteristics of a Latvian shelf company, out of which investors may prefer one or all of these traits. These are:
• Saved time: because the company is already registered with the Latvian Company Registry, the new owner can skip this step and simply handle the paperwork needed to make the ownership transfer.
• Company longevity: a company that has been incorporated gains longevity even if it is not used for business purposes. This trait can come as an advantage in terms of future relationships with business partners and institutions.
• No credit: no business activity means no debts or bad credit for the ready-made company. This is an important advantage for the overall credibility of the corporation.
• Miscellaneous requirements are already taken care of: in most cases, the company is not only registered but will also have a bank account in Latvia and a legally registered address.
The fact that the shelf company is already registered, but has remained inactive, offers important opportunities in terms of how fast the new owner can commence the business transactions. This type of company will be able to transactions immediately and this is the primary advantage: with the help of our team, investors can complete the ownership transfer process and, when needed, start to trade immediately. Another advantage, similar to the first one, is that the shelf company will be able to enter into new agreements as soon as the new owner starts trading. This is a complementary advantage to the fact that it can trade immediately, and another reason why shelf companies can present useful qualities for investors.
Advantages of buying a shelf company in Latvia
The ready-made company
comes with most of the steps needed for company registration in Latvia
already completed by a company that offers these types of services. The time the new owner would have had to spend registering the legal entity is significantly reduced. The company will, however, have a designated and registered name, however, this can be changed if the new owner decides to do so and if the chosen name is available. his simplified process is an important advantage as many investors can steer away from starting a business precisely because they fear the lengthy procedures and even the task of having to look for an available business name. when the corporate identity can be created around an existing name, that which is already assigned to the shelf company, this decision is one that is taken care of and it can save time.
Shelf corporations offer distinct advantages in terms of credit and financial possibilities for the company. A business that is several years old will have more credibility in front of banks and other institutions and will, in general, be able to request services from any bank, with no fear of being rejected. In the case of bank loans, investors should keep in mind that banks will also request other financial documents, apart from the company’s business registration certificate. A shelf company that has not been used for trade will not have significant transactional and financial history, even though they are lawfully kept by observing the annual tax submissions.
The shelf company offers advantages in other areas as well: when discussing with new clients, especially larger and well-established companies looking to collaborate with a respectable and credible company. The same credibility can also be advertised to the customers.
Shelf companies can be a suitable option for those investors who want to save the time needed to incorporate a new company in Latvia, those who want to own a credible and established company that has corporate history and no debts as well as those investors who are in need of running a business that, through its longevity, is perhaps more attractive to potential clients and business partners.
It is strongly advised to avoid shelf companies that have done business in the past and thus have a financial and tax record. Third-party shelf company sellers will sometimes offer for sale companies that have activated on the market for some time and have been involved in various business activities. While it may be a suitable option to purchase a company that has already done business in the same field in which an investor wishes to activate, we recommend to carefully consider these options and seek assistance in order to avoid unwanted corporate liability.
Our team of company formation agents in Latvia can help you with complete shelf company services. We can also help you with a due diligence process so that you can be sure that the legal entity you wish to purchase is indeed duly registered, has the stated characteristics and, most importantly, that it has no debts and liabilities to creditors.
Below, we describe the two available types of corporations in Latvia and their advantages for investors who are interested in purchasing an already existing one.
Types of shelf companies in Latvia
Most shelf companies in Latvia
are formed as limited liability companies or SIA
companies. this type of business entity is popular among local and foreign investors because the shareholders are only liable up to the extent of capital they have invested in the company. The corporation has legal capacity and it is a popular option among those who wish to purchase a company because it can be founded by only one individual and there are no restrictions for non-residents. This business form is one that cannot be traded publicly on the Stock Exchange. Investors looking to have this option can purchase another type of company, the joint stock company. This is a business form suited to larger corporations and the principle of limited liability also applies in this case. investors should know that the management requirements, as well as the reporting and accounting requirements, differ according to the chosen company type.
The purchased SIA will have a registered address in Latvia – this is one of the primary conditions for company registration in the country. This means that the shelf company will be already domiciled, meaning that the legal address will be in one of the top cities in the country, usually in Riga. The company will also come with all of the required statutory documents.
Once purchased, the accounting and tax liabilities will fall onto the new company owner. Latvia has an effective corporate income tax rate of 20% for companies.
With due diligence, a chosen shelf company can meet the business needs of an entrepreneur as much as or even greater than a newly established legal entity. We recommend seeking specialized counseling from one of our agents before signing the final purchase agreement for a shelf company.
for more information about how we can help you purchase a ready-made busienss entity in Latvia.