A blank check company and a shell company may appear similar, as both generally lack significant operations when they’re formed. However, they serve different purposes and have distinct characteristics. A blank check company is specifically created to raise capital through an IPO with the intent to acquire or merge with an existing company, often through a SPAC (Special Purpose Acquisition Company). Its goal is to provide private companies a faster route to public markets, attracting investors who see potential in its future merger or acquisition.

In contrast, a shell company exists primarily as a legal entity without active operations or substantial assets. Shell companies can be used for various purposes, such as holding assets, managing subsidiaries, or facilitating mergers. Although some shell companies may acquire or merge with other firms, they typically don’t raise funds publicly with a specific acquisition target in mind, as blank check companies do.

Additionally, blank check companies face stricter regulations, especially under the U.S. Securities and Exchange Commission (SEC), to ensure investor protections in the high-risk, high-reward environment of SPACs. Shell companies, by comparison, are more flexible but face scrutiny if involved in questionable financial practices, as they’re sometimes misused for tax avoidance or asset protection.