Creation of False Companies/Long Firms
Creation of false companies is typically done to defraud a person or an entity out of something, such as money. This form of fraudulent activity is not only referred to as creation of false companies, but creation of long firms (consumer credit fraud).
When a long firm, or false company, is set up for fraudulent purposes, it is run as a legitimate business. The scam is to eventually extend the sum of money advanced from customers while simultaneously increasing the amount of credit from suppliers. When there is a significant amount of money on hand, the fraudsters take off with the money and the goods.
This particular scam usually needs a longer period of time to pull off, and a certain amount of money on hand to get started in the first place. More often than not, the money used to set up a false company or long firm is achieved with the proceeds of another scam or long firm.
This type of fraud is not as frequent as it once used to be, largely because it is not possible to set up false companies for any length of time without leaving evidence, such as a traceable paper trail.