An LLC, or a Limited Liability Company, is a legal entity used by entrepreneurs to run a business. Although a business can still exist without registration at the state such as a sole proprietorship, there are some benefits to be gained by forming an LLC for a business. LLCs are highly appealing for small and medium businesses as the LLC structure exhibits hybrid characteristics and offers some benefits like that of a corporation and a sole proprietorship. As a registered business, an LLC requires an address. However, some would wonder if they could use a virtual address instead.
In establishing an LLC, a business address is required and the use of a virtual address is perfectly fine. A virtual address is a service where a business can use an address provided by the virtual address service provider. Thus, the official address listed in the documents of the LLC is that of the virtual address service provider.
What is a Virtual Address?
Although it has the word “virtual” in its name, a virtual address does not exist online. In fact, a virtual address is a real physical space. Essentially, a virtual address refers to a physical address offered by a service that allows businesses to run remotely by listing the virtual address as their business address.
A virtual address is also sometimes referred to as a virtual mailing address. As a service, clients are able to view and manage their postal mail online. They can also act as a mail forwarding facility. Many people take advantage of virtual addresses to help organize their postal mail. Additionally, the use of a virtual address can also help protect the privacy of individuals who would rather not let their personal addresses be publicized.
A virtual address also allows a business to have a physical presence in a location without having to shell out extra costs to actually obtain an office space and hire personnel. The use of a virtual address is highly common for remote and online businesses that require a presence in a particular area.
Can I Use a Virtual Address for My LLC?
An individual or an entity can list a virtual address for their LLC.
As long as the members, the people who own the LLC, have already chosen a virtual address to be used for their operations, they can simply list the virtual address in their Articles of Organization – the legal documents that are needed to establish an LLC. The Articles of Organization are typically submitted by an individual or an entity taking the role of the Organizer. It is the Organizer’s primary function to undertake the necessary steps to file for the formation of the LLC, and to act as the point of contact between the state and the LLC during formation (Source: FundsNet).
Thus, setting up an LLC using a virtual address is essentially the same steps required to set up an LLC with a physical address.
Why Use a Virtual Address?
There are several reasons why using a virtual address is a considerable option for many business owners.
For one, a virtual address is a good option for people who do not have access to any other space that can be used for business operations. Although it is possible to use a home address, there are reasons why this is not a good choice. People concerned about privacy would rather use a virtual address than use their home address when forming an LLC because the business address listed in the Articles of Organization can become publicly available. Having a home address become public knowledge can raise some safety concerns.
Moreover, some people cannot actually use their home address for their LLC. Depending on their local zoning laws, HOA rules, or other factors, there are certain situations where a home address cannot be used for an LLC. Thus, people that would operate out of their home could use a virtual address instead.
Another reason why using a virtual address would be better than using a home address is for building credibility. Citizens of a city are usually familiar with the different areas of the city and they would know if an address were in a residential area or a commercial area. Although many people do not have problems with businesses set in homes, there is a preconceived notion that a business set in a commercial area is more credible than one set up in a residential space.
Another major reason why people would use a virtual address is when they are running an LLC remotely, possibly even from a different state. Since LLCs are regulated and controlled at a state level, LLCs that are established in one state should be based in that state. However, people can run an LLC in one state while they are actually based in another; They can do this using a virtual address.
It is important to have an address in the state where the LLC is established because aside from it being required by the state, this is the address used by clients of the LLC. This could also be the address where the state would contact the LLC.