Can a Virtual Office Be Used to Register a Business?
Many small businesses assume they need a physical mailing address to register their businesses. This leaves them two options. The first is to use their home address. The second is to find permanent office space that comes with a physical address. But neither may be a good option.
Problems with Registering with a Home Address
Small business owners who elect to use their home address to register their businesses may find themselves entangled in problems. I’ve discussed some of these in previous blog posts. Following are some of the reasons business owners should not—or cannot—use their home addresses:
1. Loss of LLC and corporation benefits.
One of the reasons small business owners register their businesses is to separate their personal assets from their businesses. Specifically, forming a limited liability company (LLC) or corporation protects a small business owner’s personal assets. But a small business owner may lose the benefits of the LLC or corporation if the court system deems business and personal activities are intertwined. The small business owner suddenly could be personally liable for business debts, penalties, and other obligations.
2. Prohibited by lease and HOA rules.
In some cases, small business owners simply cannot use their home addresses as a business address. Notably, some apartment and condominium communities may have documented policies that are built into lease and community agreements that prohibit residents from operating businesses out of their homes. Even single-family home communities sometimes ban home offices in their HOA regulations.
3. Prohibited by zoning ordinances.
Some municipalities have codes that restrict or prohibit homeowners from operating a commercial business—or certain types—from their home.
4. Loss of personal privacy.
Registering a business with a home address means the business must use that address on legal contracts and other agreements with customers. This exposes personal information many business owners do not want revealed. Customers could show up at the door of a small business and often know when and when you aren’t at home (a potential security issue). But it is more than just customers knowing where you live. Forming an LLC or corporation requires a registered agent in the state in which the business is to operate. Important papers such as legal notices, tax information, and government documents are sent to the registered agent’s address.
Problems Registering with a Permanent Office Address
Leasing a permanent office space eliminates the above problems when you register a business from your home address. But with a permanent office space comes other issues. Following are some of the most prevalent ones:
1. Higher cost, lower margins.
Leasing permanent office space isn’t cheap. Indeed, studies show upwards of 10% of a small business revenue can go to office rent and upkeep. This can make or break many companies—especially when they are just getting out of the gate.
2. Brand impression.
Office space in locations that convey a great brand impression typically come with a lofty lease cost. The adage, “You get what you pay for” is quite apropos here. Thus, for many small businesses, securing a permanent office space in a location that has the brand association they want is in a price range beyond what they can afford.
3. Not the right space for customer and partner meetings.
Permanent office locations for small businesses often have inadequate meeting room space for customer and partner meetings.
What to Look for in a Virtual Office
Instead of registering their businesses with their home addresses or securing permanent office space, many small businesses are electing to use a virtual office. In most cases, virtual offices come with a street address, on-duty reception, mail forwarding, and other business services. When assessing virtual office options, small business owners should do the following:
1. Legitimacy and longevity of business.
Verify that the virtual office provider has been in business for five-plus years (not a fly-by-night provider) and has documented reviews from customers.
2. Others are sharing the virtual office.
Confirm how many other businesses—and what types—are registered to the same address. In this instance, a small business brand will not be damaged by sharing the same space with other businesses.
3. SEO rank.
Ensure that you receive a suite number in addition to a street address. This is critical in order for a business to rank in Google My Business Listings.
4. Virtual receptionist.
Related to the above point, Google My Business Listings also look for offices that maintain business hours. Rankings for virtual offices without a virtual receptionist suffer.
5. Other services and amenities.
Verify what other business services are provided such as mail receipt and forwarding, a lobby greeter, and availability of coworking space, day offices, and rented meeting rooms. These often are critical as a business grows and expands.
Davinci Virtual Offices meets all of the above criteria—and more. And as Davinci Virtual Offices partners with Legalinc for Registered Agent and Business Formation Services, Davinci is able to help guide small business owners quickly, efficiently, and effectively through the formation of an LLC, corporation, nonprofit, or any other specific entity type.