A Virtual Company: the Pros and Cons

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A Virtual Company: The Pros and Cons

Applied Business Law – 34 Team Assignment – Week 7 Written and Submitted by: Renata Davis

Virtual Space or Real Space
Virtual companies (VCs) have little or no tangible presence outside of the internet. They could rightfully and insightfully be called businesses without walls. The possibilities for a VC are limitless and only bound by the limits the owner/entrepreneur puts on them. All business is conducted electronically. No need for high rents and overhead costs or buildings in which to operate their businesses. It is also important to note that virtual companies are generally service or sales oriented and are goal driven. The focus is solely on what the business has marketed and intends to provide and the ability to outsource things not directly related to those services is much easier. For example, a virtual administrative assistant whose task is to produce 30 copies of a presentation can be accomplished electronically by sending the file to the printing company via email and having the presentations ready for pick up and customer shipping all in the same day without the hassle of having to take a trip to the printer twice. In today’s busy world, coupled with the economic downturn, VCs have made it easier for businesses to get some of the services they need, i.e. secretaries, administrative assistants, bookkeepers and accountants, sales staff and even lawyers, without the overhead they would experience if they had to hire someone and provide a base salary along with benefits. Virtual businesses offer owners the infrastructure of a regular business without the actual infrastructure! VCs are becoming increasingly popular for a number of different reasons and one of the reasons is that a virtual company removes the headache of finding a location for the business and a building in which to conduct the business. The overhead costs associated with the task of finding suitable space in which to operate, equip and insure the business can often times put a company in the red before it actually opens the doors for business. The costs associated with a virtual company are minimal in comparison. Those costs include only the equipment that the business needs to initially get started and to operate, i.e. laptop/computer, printer, fax machine, telephone, desk and chair, paper supplies such as copy paper and notepads, and pencils. With these things, the virtual business will be up and running without the heavy duty costs associated with a physical

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location. It is much cheaper to open a virtual business but there are still responsibilities that must be undertaken and accomplished to ensure that the business is viable.

Company Compliance
There are some basic guidelines in forming any business and to some degree, the same holds true for a VC. For the purpose of this paper, we can explore some of the basic rules for a home based business because in essence, that is what the foundation of a virtual company is most like. One of the first things that should be investigated is zoning laws in the area where the virtual company/home based business will be conducted. Zoning regulations are designed to address compatibility concerns that arise when a mixture of commercial, industrial, and residential uses are located together. Zoning regulations can regulate types of uses, architectural aesthetics, and landscape and buffering of developments. With a VC, all of these things are taken into consideration as they would be if the business was being started in an actual building. Based on the services provided, there are things to consider such as signs, traffic, etc. Secondly, the issue of taxation must be addressed. Regardless of whether the virtual company is going to expand beyond one employee or not, the business still needs to be recognized by the IRS. Hence, an FEIN, or tax ID number needs to be obtained. If there are plans for the VC to employ more than one employee, an EIN or Employer...
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