A shell company is a business entity that exists only on paper and has no significant operations or assets. These companies are often created for various legal purposes, such as holding assets, facilitating mergers, or managing investments. They can be used in legitimate business practices, but they may also be associated with illegal activities like tax evasion or money laundering. Shell companies are often registered in jurisdictions with favorable regulations, known as tax havens. This allows individuals or organizations to maintain anonymity and reduce tax liabilities. While not inherently illegal, the misuse of shell companies can lead to financial crimes and regulatory scrutiny.