Conventional thinking is that every business needs an office. The office is where people gather. From a legal point of view, it is where the company resides.

Advancement in technology has enabled people to work from anywhere in the world. Virtual teams are the order of the day. The purpose of an office is shrinking, especially in technology businesses. It has given rise to the virtual office.

 A virtual office, by definition, is an office for limited purposes only. Virtual offices in Bangalore are seeing a rise in demand. They are available in all prominent localities including Koramangala, HSR Layout, and CBD areas.

A person typing the keyboard and a coffee placed near the laptop

 What are Virtual Offices?

A virtual office is not an office in its real sense. It is a service provided by many business centres and coworking spaces that allows users to use their office for specific purposes.

 What are the offerings

Virtual offices offer their subscribers the following benefits :

 To use the office as a communication and business address

  • Telephone response services
  • To use the office as a registered office for legal purposes
  • To use the office for meetings and training

While the concept of communication address seems outdated, businesses do look to register in prominent buildings. Many opine that the business address adds to the credibility of the venture. A financial institution may need to register itself in the CBD just to be accepted as a serious player in the market. By having just the business address and working from cheaper locations, entrepreneurs create the right impression and at the same time save on costs. 

Telephone services are again a yesteryear concept. Yet, many small businesses and professionals use their services to generate leads. It is popular amongst professionals keen to outsource their secretarial operations. Answering services are still useful for small businesses with limited staff. 

In most countries, including in India, companies, by law, are required to have a registered office. It is for all legal purposes where the company resides. Virtual office packages allow small businesses to register their companies and firms at these centres. It is therefore common for hundreds of businesses to share the same office address.

In India, businesses use virtual offices for registering their company under the Companies Act and for GST registration outside their home state. 

Virtual office packages also allow their users to use conference rooms for meetings. Some packages may even include the utilization of private office and desk space regularly. 

Benefits of Virtual Offices

A virtual office is a great boon to many small businesses. It primarily helps in the following ways:

1. Office for registration

When starting up, entrepreneurs face the problem of not having a physical office in which to register their business. Residential complexes do not allow their use for registration and commercial purposes. Entrepreneurs, therefore, prefer to register their business at these virtual offices where they charge an annual fee for such services.

2. Registering in the Other States

Certain Tax laws (example: GST) need businesses to be registered in different states to conduct business. Once again, to register their business, they require a physical office that can be approved by the tax authorities. Virtual offices are better than renting out an office when there are no employees to work from it.  

3. Lead augmentation & Meetings 

Professionals like lawyers, chartered engineers, etc. can use services like telephone answering, mailing address, and even the meeting room facilities effectively. These professionals with small teams use these as outsourced secretarial services that are cheaper than having a fully functional team. Virtual Office space includes meeting room access across the city or country that is widely beneficial.

Risks in offering Virtual Offices

Virtual offices are subject to misuse by subscribers. The following risks are prevalent.

1. Frauds, illegalities

A  significant risk with allowing people to register their businesses at coworking spaces is the lack of control over their business practices. Some misrepresent the coworking space as their rented office and provide wrong credentials. Some coworking spaces have also been pulled up by authorities when the virtual office users have defrauded others. 

2. Demarking the office space

Certain laws require a demarcated area that is designated the registered office, and not a small post box. It is particularly relevant for companies dealing with the sale of goods. Sales tax laws will require the area marked where these goods are stored. Using virtual office services for such registration may be deemed to violate the requirement.

3. Inability to cancel the registration

Typically, coworking spaces issue No Objection Certificate (NOC) for registration. However, after the subscription period ends, there are no clear ways to withdraw the NOC, and companies may continue to be registered. 

Coworking spaces need to implement strict KYC rules to overcome these frauds. Check the necessary documents before renting the space. In some cases, coworking spaces have designated a set of Chartered Accountants and Company Secretaries to complete legal formalities. By involving only those professionals known to them, coworking spaces are reducing the risk of illegal activities carried out from their premises.

Also, coworking spaces should use the terms “Business Centre” or “Coworking Space” in their official address. Operators should not only provide distinct numbers to each of their private offices but also insist that they are used in all the registrations.

Conclusion

Virtual offices had lost their relevance in recent years due to technological and social changes. Garage startups that have gone on to become unicorns without the need for fancy virtual addresses. The tightening of financial controls across the world has prompted businesses to shun away from letterbox companies to having full-fledged offices. Coworking spaces have emerged as an affordable alternative to expensive offices and have served all the legal and real requirements of an office. 

The current wave of work from home and the slowdown have prompted companies to reconsider having a fully functional office and instead move to virtual offices for legal compliances. Coworking spaces can use this opportunity to increase their revenues however they have to be careful. Laws in India are complex, and enforcement agencies do not fully understand the concepts well. It leads to dragging the coworking operators into the picture for default by their virtual office members. 

Operators have to place strict KYC norms before allowing users to sign up for virtual office services, especially the ones that include registration of businesses. A thorough check of the business and its promoters is paramount. 

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