Every business, ideally before its birth, if not during its infancy, has to decide one thing: Where it will it be located.
Any new business will need a mailing-address to file a business entity, to open a bank account, to register domain names, get business licenses, tax and permits, for invoicing and billing, receiving checks, and being placed on Google, phew! And that’s just to start.
Today for most new businesses, a physical, commercial office is optional and can be considered as an unnecessary overhead. That’s right! Whether wearing PJs in your home office, at your favorite coffee shop, your vehicle or co-working space–yes, most of us can work pretty much from anywhere!
There is however a distinction between your workspace — where you conduct your work and your business location — where your business is housed.
A common behavior for a new consultant or a new entrepreneur often is reaching what they believe is the logical decision is to list their business address as their home address.
But is your home address the best home for your business?
This common choice of “home-as-business-location” is one that has profound impact beyond your startup years.
For many entrepreneurs, we recommend an in-between approach: Work from home, but choose a virtual office provider like Office Divvy to house your business location.
Why? Because the business-location for your entity needs to be a well-thought-out and well-executed idea that takes your business to a home-run. So, let’s delve in:
1. Privacy concerns
When you register your business at your home address, that information becomes public record. Before you know it, your address pops up in your State’s Department of Corporations and other public and online directories will buy and list that information.
You may not care at early stages, but when your family is subjected to curious clients or possible disputes with customers (it happens), having your home address available to the public isn’t the best choice for safety and privacy reasons.
2. Professionalism: Impressions Matter
Working from home and using your home address as a business location are two different things.
Folks will (and do) google your business address. Do you really want a stranger, a vendor or a customer studying your home on Google maps or not realizing and showing up at the door of your home?
You could lose credibility with clients and vendors who feel the business may be a sham, since the location on Google maps doesn’t show an actual office. It could cost you new business and hurt your credibility.
3. Potential Increased Liability
The reason you create an LLC or a Corporation is for the purpose of separating your business entity from your individual entity (that is “you” as a person).
When you have a business entity it makes business activities and debts separate from your own.
This may only apply though, if you keep your personal and business activities separate. If you do not, there will be problems when your LLC faces scrutiny or a lawsuit. In that lawsuit the opposing side may try to use anything they can against you to go after your personal assets.
It will be up to you to prove your company is its own entity.
According to James Manfre of Law Offices of James L. Manfre, you can do this by having three things in place:
By ensuring your company is an LLC or similar corporate structure with limited liability.
By having someone other than you answer your calls.
By setting up your company address at a different location from your personal address.
Using your home address can potentially put you at risk for “piercing the corporate veil,” which means it makes you liable for obligations and debts as a result of your business.
This is a dangerous route to take for both you and your family.
4. Don’t Put Your Web Presence at a Disadvantage
Yes, we mean SEO… Google will “ding” a home address as a business address. Google favors a commercial-physical location over a home (or PO Box, and UPS box options).
To get around this, you can tell Google that you provide services in people’s homes and in their area, but admitting that can come with other disadvantages in terms of ranking and signals to others your company may not be a mature one with an office space.
You either risk getting dinged and losing traction with your SEO or looking unprofessional. It’s a lose-lose situation for everyone.
5. The Myth of Tax Deduction for a “Home Business?”
You can claim different expenses related to your home office, such as a portion of utilities and insurance on your home. So this might sound like a wonderful way to save plenty of money for your business.
Michael Callahan of Callahan and Associates, a certified public accountant, strongly advises a space outside of your home as your business address.
It is because to do the home office deduction right you will need an entirely separate room that is your dedicated office, within your house. Not a laptop on your sofa– an office you can measure the square footage of, because tracking the square footage of your home and the square footage of the office itself is required.
Once you have all of those records in place you will then need to file a separate form with your taxes so it is easily identifiable to the IRS. In the end it is a time-consuming process, and Mr. Callahan typically recommends a Co-working Space or Virtual Office provider as your business location instead.
A “business location” could (and should) be different than your home address, even if you’re working from home most of the time.
How about a PO Box at your post office, or a mailbox service? Do they solve the location conundrum? This isn’t a terrible idea, although comes with limitations and main drawbacks such as:
A PO box or Mailbox service provider does not give a professional feel, so you’re really not solving your image issue. However, clients are not going to show up at your home.
PO boxes are not accepted when you register as an LLC or corporation, so you will still have to use your home address to do so. Making it your public business place anyway.
A PO box can’t receive every type of mail, so you will still have to give clients your home address to mail certain things to you if needed.
Since 2008, we have worked with hundreds of entrepreneurs at Office Divvy. As a co-founder of Office Divvy, when it comes to how I think about how an entrepreneur should approach to their business location, I am biased of course.
But this advice comes as a result of observing the common entrepreneur and startup mistakes early on over the past dozen plus years, especially by those who are jumping into traditional models (such as traditional office rental) and those who want to work from home (who choose home as business location).
The way we all work is changing. It is important to think outside the box. An offering such as Office Divvy’s business location may be a perfect match to the needs of early-phase startups. From as low as $259 a month, one can now operate your business from a true physical commercial location and solve your business location and mailing address problem easily. Plus, your have a front office staff, and that means whether you’re in or out in any given moment, your business is truly open.
And as a bonus, you’re plugged in to a community of entrepreneurs for networking, to learn from, bounce ideas off of or leverage to amplify your business. To learn more about this and other Office Divvy services, visit www.OfficeDivvy.com.