Dummy Corporation Law and Legal Definition

A dummy corporation or dummy company is an incorporated firm created to serve as a front or cover for one or more companies. It helps to hide the identity of its principal(s) or to shield them with the limited liability protection provided by a corporation. Dummy companies may appear to be real but it lacks the capacity to function independently. The main intention of creating such companies is to conceal true ownership and/or avoid taxes. However where an individual sets up a corporation for the primary purpose of insulating him or her from liability, a court might under the most egregious of circumstances, declare the entity a dummy corporation and expose the shareholder personally.