A shell corporation is a company or corporation with no significant assets or operations, often formed to obtain financing before beginning business. Shell companies were primarily vehicles for lawfully hiding the identity of their beneficial owners, and this is still the defining feature of shell companies due to the loopholes in the global corporate transparency initiatives. It may hold passive investments or be the registered owner of assets, such as intellectual property or ships. Shell companies may be registered to the address of a company that provides a service setting up shell companies, and which may act as the agent for receipt of legal correspondence (such as an accountant or lawyer). The company may serve as a vehicle for business transactions without itself having any significant assets or operations.

Shell companies are used for legitimate purposes such as holding assets or tax avoidance. However, they can also be used for illegal purposes such as tax evasion, hiding stolen assets, or money laundering. Anonymity, in the context of shell companies, relates to anonymity of beneficial owners of the company. Anonymity may be sought to shield personal assets from others, such as a spouse in the event of divorce, from creditors, or from government authorities.

Shell companies' legitimate business purposes are, for example, acting as trustee for a trust, and not engaging in any other activity on their own account. This structure creates limited liability for the trustee. A corporate shell can also be formed around a partnership to create limited liability for the partners, and other business ventures, or to immunize one part of a business from the risks of another part. Shell companies can be used to transfer assets from one company into a new one while leaving the liabilities in the former company. Shell companies are also used for privacy and security reasons by wealthy individuals and celebrities. Accordingly, shell companies may be used to generate both pecuniary and non- pecuniary private benefits by their beneficial owners.

The U.S. Securities and Exchange Commission defines shell company as follows:

Shell company: The term shell company means a registrant, other than an asset-backed issuer as defined in Item 1101(b) of Regulation AB (§ 229.1101(b) of this chapter), that has:
(1) No or nominal operations; and
(2) Either:
(i) No or nominal assets;
(ii) Assets consisting solely of cash and cash equivalents; or
(iii) Assets consisting of any amount of cash and cash equivalents and nominal other assets.

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Some shell companies may have previously had operations that shrank due to unfavorable market conditions or company mismanagement. A shell corporation may also arise when a company's operations have been wound up, for example following a takeover, but the shell of the original company continues to exist. The term shell corporation does not describe the purpose of a corporate entity; in general it is more informative to classify an entity according to its role in a particular corporate structure; e.g. holding company, general partner, or limited partner.

Shell companies are a main component of the underground economy, especially those based in tax havens. They may also be known as international business companies, personal investment companies, front companies, or mailbox companies. While these terms are generally used interchangeably in practice, their meanings are not the same and each term is generated to refer to a different theme of illegality. Shell companies can also be used for tax avoidance. A classic tax avoidance operation may utilize favorable transfer pricing among multiple corporate entities to lower tax liability in a certain country; e.g. Double Irish arrangement.