When considering starting a business in Portugal, entrepreneurs often face a crucial decision: should they acquire a shelf company or incorporate a new company from scratch? This article provides a detailed comparison of Shelf Company vs. New Company in Portugal, focusing on the legal, financial, and practical aspects that matter most to foreign investors and local entrepreneurs.
What Is a Shelf Company in Portugal?
A shelf company, also known as a ready-made company, is a legal entity that has been incorporated but has never conducted any business. These companies are kept “on the shelf” by law firms or service providers, ready to be sold to those who want to start operations quickly without going through the incorporation process.
What Is a New Company in Portugal?
A new company is incorporated from scratch, tailored to its founders’ specific needs and preferences. The process involves registering the company name, drafting articles of association, appointing directors, and fulfilling all legal requirements for incorporation.
Shelf Company vs. New Company in Portugal: Key Differences
1. Speed of Setup
- Shelf Company: The main advantage is speed. As the entity is already registered, you can acquire a shelf company and start operations almost immediately.
- New Company: Incorporation in Portugal is relatively fast, often completed within a few days, especially with the “Empresa na Hora” (Company in an Hour) service. However, it may take slightly longer than purchasing a shelf company.
2. Legal and Financial Risks
- Shelf Company: There are significant risks of hidden liabilities, such as undisclosed debts, previous contracts, or tax obligations. Even if the company has never traded, due diligence is often limited, and you may inherit unforeseen legal or financial issues.
- New Company: Incorporating a new company ensures a clean slate. You have complete control over the company’s history, structure, and compliance, minimising the risk of inheriting past problems.
3. Reputation and Transparency
- Shelf Company: The company’s background may not be fully transparent. Banks, suppliers, and authorities may scrutinise shelf companies more closely, potentially making establishing business relationships or opening bank accounts harder.
- New Company: A new company offers complete transparency. Stakeholders can trust that the business has no prior history, which can facilitate smoother interactions with banks and partners.
4. Customisation and Flexibility
- Shelf Company: Shelf companies are created with generic articles of association and share structures. Adapting them to your business needs may require additional legal work and costs.
- New Company: You can tailor every aspect of a new company to your requirements, from the share structure to the company name and business purpose.
5. Cost Considerations
- Shelf Company: While marketed as a time-saving solution, shelf companies often come with higher upfront costs, including premiums charged by service providers and additional legal fees for updating company records.
- New Company: Incorporation costs are generally lower and more predictable. You only pay for needed services you need, without hidden fees or premiums.
6. Compliance and Regulatory Issues
- Shelf Company: Portuguese authorities are increasingly vigilant about shelf companies due to money laundering and tax evasion. Concerns. This can result in additional scrutiny, audits, or even investigations.
- New Company: New companies are less likely to attract regulatory attention, provided they comply with all legal requirements.
7. Banking and Financing
- Shelf Company: Opening a bank account for a shelf company can be challenging, as banks may require extensive documentation and explanations regarding the company’s history.
- New Company: Banks are generally more receptive to new companies with clear, transparent backgrounds.
Shelf Company vs. New Company in Portugal: Which Is Better?
For 99,9% of the entrepreneurs and investors, incorporating a new company in Portugal is the superior choice. The process is efficient, cost-effective, and provides a clean legal and financial slate. While shelf companies may offer a slight time advantage, the risks and potential complications often outweigh the benefits.
When comparing a shelf company vs. a new company in Portugal, the advantages of starting fresh far outweigh the minor time savings of acquiring a shelf company. Incorporating a new company is almost always the better option for a secure, reputable, and fully compliant business foundation.
If you are considering doing business in Portugal, consult a service provider such as MCS to ensure your company is set up correctly and fully compliant with Portuguese law.
The founding of Madeira Corporate Services dates back to 1996. MCS started as a corporate service provider in the Madeira International Business Center and rapidly became a leading management company… Read more
