A limited liability company and any business entity that has no significant assets or ongoing business activities/operations. Typically, shells have no physical presence other than a mailing address; have no employees; and have no offerings (products or services). Shells are often established by individuals and businesses to carry out legitimate transactions, such as domestic and cross border currency and asset transfers, or to fast-track corporate mergers, acquisitions and reorganizations. One of the common uses for shell formations is in the arena of reverse merger or acquisition (through a simple acquisition of a shell and then using shares of a private company as consideration). By nature, shells are not illegal.

Most shell corporations are formed in either of two ways:

(1) the existing public company stops its activities through the sale/acquisition of its assets or by way of a bankruptcy filing (which eventually leaves the company with no assets other than its corporate shell). Though it has no assets, a shell is still capable of trading on an exchange or on the over-the-counter (OTC) bulletin board or pink sheets;

(2) a shell corporation can also be formed by its promoters filing a Form 10 (in a sense, a registration statement). As such, the company becomes a public reporting company that is required to submit periodic reports with the relevant exchange authorities (e.g., the SEC in the United States). However, its stock not tradable (actually, it is not listed). In this state of being, a shell is only a ‘‘reporting’’ company.