It is crazy how virtual reality is making its way into the real estate business and digitalizing the whole business process. With the ever increasing tendencies towards cost-consciousness and social distancing in a pandemic-stricken world, more and more businesses are working from virtual platforms, based in virtual offices and adopting digital marketing practices. Unlike the traditional perceptions of having a fancy office in some fancy location, now businesses are mostly located in virtual office set ups tied to well-known business addresses and registered with a virtual mailing address.
However, it is important that one understands the legalities of setting up a virtual business to attain necessary personal and professional safeguards. First of all, you may want to keep personal assets separate from business liabilities while laying down the foundation of a formal professional set up. This is important as in the absence of adequate safeguards, your personal assets and that of your partners may get exposed to unlimited liabilities. This means, your personal assets are not protected, and if you get sued or are unable to pay business debts, you will be personally liable. Therefore, it becomes essential that a business be established as a legal entity. Which entity it will be, can be determined by the type of business one wants to establish.
Different Levels of Business Entities
There are different levels of business entities from a sole proprietorship to the corporate level.
A Sole Proprietorship?
A sole proprietorship is not actually a legal entity, which means there is no need to fill any form or get into any legal procedures to start a business. It practically starts the moment one engages with the business. A man selling apples on the corner of a street—for instance—is a sole proprietorship. This may sound simple and easy, but the fact is such kind of business entities are suitable only for small businesses such as selling apples or providing services as a one man show. For larger set ups, such as a virtual real estate business involving two or more business partners, several employs and scores of legal responsibilities, sole proprietorship is not a very good option. If you personally own your online business in a sole proprietorship, you and your business are viewed as one; and your home or personal bank account, and those of your business partners, are at a risk to fulfill your unpaid business debts, legal judgments, and other legal business obligations.
A safer and commoner alternative is a Limited Liability Company or LLC.
A Limited Liability Company—an ideal option?
Yes, if you want to lay a safer foundation for your virtual start up. It is essential that everyone who wishes to start a virtual business must form a Limited Liability Company (LLC), a business entity. An LLC is not compulsory to initiate and operate a business, but it provides many essential benefits that makes it worth the investment. Its benefits are manifolds; here, we are mentioning some for you to take a grasp of why you should register your business as an LLC.
Offers Limited Liability:
As the name indicates, a Limited Liability Company offers limited liability, that is, it exempts its owners from personal liability for business obligations. Limited liability means business owners will not be obliged to pay business debts. Instead of the owner, the LLC is liable to pay for such debts exclusively with its own assets. The personal assets such as a business owner’s house is well protected from the outreach of creditors and law suits. Furthermore, an LLC safeguards its owners against personal liability for any frauds committed by other coworkers. It also protects the owners against any personal legal face-off as a result of some harm or injuries inflicted during the course of business operation.
However, you will have to follow appropriate guidelines to keep your business separate from your personal assets. If you offer any personal guarantee to a creditor for some larger debts, then you will be personally liable for any associated legal obligations, and your personal assets may be liable to satisfy any unpaid debts.
Simple Tax Return Process
Registering a business as an LLC has made the tax return process extremely easy. In case the LLC is owned by one person, LLC tax return process works the same way as a sole proprietorship. The profits earned by an LLC business are passed to the owner’s individual tax returns, and then the owner can pay the taxes at individual tax rate on the profits earned by the business. In addition to being simple, it is very cost-effective as well, as you have to pay much less than at the corporate level. This is because, unlike on the corporate level, you do not need to hire a tax preparer or pay taxes at higher rates.
Provides Great Operational Flexibility
If you have a corporate level business, you may require a large management team to handle the extensive documentation work. In a corporation, you have to keep a documentary record of shareholder meetings and business decisions. However, this is not the case with a business registered as LLC. LLC provides huge operational flexibility in terms of management and record keeping. It requires less record keeping responsibilities and hence can be managed by LLC members or a small management group.
So, if you are planning to start a virtual business, registering it as an LLC is an option worth considering. It provides essential legal safeguards, protecting everyone in your business from personal liabilities. Therefore, if you have already prepared your business plan, then get a virtual office, a suitable virtual mailing address for LLC registration, and form an LLC to lay down a well-protected and promising infrastructure for your virtual business.