Shell Companies for Evading Taxes
Robert Thomas’ creation of an LLC to purchase a vehicle can be considered a controversial decision from the perspective of ethics, but this action does not violate state laws. Robert Thomas made a $351,800 vehicle purchase at the Dixie RV Super Store in December 2007 using a Montana firm that had been created specifically to complete the transaction (Carter, 2017). Rich out-of-state individuals have been employing this tactic for years due to a major legal gap that does not prohibit his procedure (Carter, 2017). To avoid paying a substantial amount of money in taxes, residents form limited liability businesses in the jurisdiction (Carter, 2017). To my mind, I agree with Robert’s right to make such a decision since he was acting within the legal framework.
Shell companies can be allowed to exist since, in fact, they are not illegal and represent no threat to society in case not used directly for criminal activity. A shell corporation is one that does not possess any major assets or functioning businesses (Kenton, 2022). Although these entities are not unlawful, they are occasionally used in an improper manner, such as to hide corporate ownership from the community or government authorities (Kenton, 2022). Even though shell companies can be allowed to exist since there is no strict legal restriction to their existence, they are generally not needed due to the feasibility of the occurrence of potential negative consequences.
Another example of a shell company can be related to the case of Sega Sammy Holdings. In June 2013, Sega Sammy Holdings acquired the defunct, bankrupt and insolvent Index Corporation (Kishita & Hayashi, 2019). In order to transfer and exchange the resources of Index Corporation, Sega Sammy Holdings established the fictitious “Sega Dream Corporation” in the same year. In this case, the owners of Sega Sammy Holdings were focused on the intention to organize a structured flow of assets that were a part of Index Corporation.
References
Carter, T. (2017). Out-of-state car buyers use Montana LLCs to evade taxes. Bozeman Daily Chronicle. Web.
Kenton, W. (2022). Shell corporation. Investopedia. Web.
Kishita, T., & Hayashi, N. (2019). Parental control on subsidiaries in corporate groups with a pure holding company. Review of Integrative Business and Economics Research, 8(3), 43. Web.