What are some methods used to detect a shell company? Solution Definition A shell company is an entity that has no active business activities, operations and assets. These mainly exist on papers. They don’t have any have no physical presence. These companies employ no one and produce nothing. They are frequently used to shield identities and/or to hide money. These companies are generally formed for avoiding tax in illegal ways and A shell company can often be identified by a number of red flag indicators including: • No phone number • No e-mail address • No physical address • No company logo • No contact person • No federal identification number.