Virtual offices vs. reality of business permits

Atty. Raymund Martelino
/in /by

Virtual office solutions or co-working spaces promise opportunities, efficiency and convenience. This innovative space use gives community members access to high technology, outsourced staff and basic services necessary for business operations sans the hassles. On top of it all, the cost is almost negligible. This is what lures business owners, mostly startups and small and mid-size enterprises (SMEs) to adopt this solution.

Some years ago, setting up a business required more capital since you have to invest in a space to serve as the principal place of business. Using your home address gives the impression that the business is not professional, while buying a unit may not be an option and leasing is the next best thing. The problem is, the business has barely started and you are going to shell out too much just to get off the ground.

Virtual office to the rescue. The first advantage of having a virtual office is that you get to use a professional business address. Your future clients will get the impression that you are not a fly-by-night operation or a scam. Before my firm got its office space, I used to meet clients in coffee shops, hotel lobbies or their offices. Having a professional address puts legitimacy in your operation and gives clients the impression that you take business seriously. Virtual offices offer members use of private conference rooms and lounge areas.

The second advantage is that getting a virtual office or co-workspace reduces your exposure to high capitalization costs. Considering that the rates for this arrangement are significantly less than a normal lease, you will not have your resources allocated for capital expenditures or monthly fixed cost of lease. This also lowers the risk for the business. The money you save can be used for other expenses essential to the core operation of the business.

Third, you get access to high technology and fixed assets. The space is usually equipped with high speed internet, telephone, fax and sometimes video conferencing equipment. The lease or membership fee usually includes utility costs. You don’t have to apply for your own separate telephone, electricity, water and internet account. No need to buy a printer, copier or fax. The space usually is furnished with lounge areas and a pantry with unlimited coffee. Yes, unlimited. Talk about value-added service. The meeting rooms are already equipped with projectors, screens and sound systems.

Fourth, you do not need to hire a secretary or messenger. The most basic membership package usually includes mail handling and secretariat services. You won’t have to worry about missing calls. Maybe for a little extra, they can include a dedicated email account.

Lastly, since the setup is akin to an open community, networking with other members is possible. Members can be your potential clients, suppliers or service providers. A good virtual office or co-workspace can be an ecosystem of opportunities.

Now it may be good to see the flip side. Of course, there may be disadvantages to the virtual office or co-work type of office. It may not always be the best setup for your business or your operation. Also, always read the fine print in those membership contracts.

Is the virtual office or co-workspace a lease of space or more like a membership club for services? One popular provider defines the membership arrangement akin to a hotel accommodation. Meaning, the member pays for a fixed monthly fee or a pay-per-use fee and is assigned a space on a first-come, first-served basis, much like checking in and out of a hotel. That being said, the member is not a business nomad in a big city, but a nomad in a small ecosystem or local community.

Also, considering that there are a lot of providers on the market today, customers and clients are already aware that you are merely a member or occupying a spot in a co-workspace. They may also discover sooner or later that you are merely in a virtual office arrangement where you just use the space as a mailing address. Then if you hire employees, the space may be too small for them or even the files you would rack up over a short period. Some of your staff might end up working from home or elsewhere.

In some cases, privacy is also be an issue. It will be a challenge to keep business secrets, strategies and other confidential information safe in an open office within a co-work area. Even the client or customer identity may be compromised by meeting them there. There may also be a lot of distractions and disruption in your operations.

Then you have to contend with the local government units (LGUs) for your business permit. This is required for any business that wants to operate within a city or municipality. Each LGU has different procedures and fees depending on the local city or municipal ordinance.

One of the main requirements for getting a business permit is presentation of a lease agreement with your landlord and certificate of occupancy from the building where the address is located. Virtual offices and co-workspace only sign members up with a membership form. LGUs sometimes do not recognize the validity of these membership agreements as substitutes for a lease contract.

Other local permits that a virtual office or co-workspace member may have difficulty in getting would be the occupancy permit, locational clearance, fire permit and sanitary permit. Most of which are dependent on the provider. If the arrangement is akin to a hotel accommodation or virtual setup then how can this operation be licensed under existing law?

Virtual offices and co-workspaces are like Uber, Airbnb and Facebook. These technologies revolutionized the way we work, move, live and communicate. Uber is the largest transport company in the world and they do not own the vehicles. Airbnb is a hotel service that does not own the space. Facebook is a media giant that does not own their content. Virtual office solutions and co-workspaces give a cost-efficient and alternative business space solution for the modern business person. Regulation just has to pick up the pace and catch up.

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