Running a company with no office is becoming normalized. New companies are often too early and small to sign a lease. Established companies are transitioning to remote. And others have built their organization from the ground up with no intentions of ever having an office.
Whatever the reason, understanding where to base a company with no office can be confusing. When a company has no physical presence — no office, no co-working space, no HQ — where should it be based?
Before we dive into how to handle where a company with no office is based, we first need to understand what it means for a company to be based somewhere.
Traditionally, companies consider themselves based wherever their offices are located.
This loose definition is not far off from set legal precedents — in the case of Hertz Corp. v. Friend the United States Supreme Court unanimously ruled that a company’s principal place of business is “its nerve center, i.e., the place where its officers direct, control, and coordinate the corporation’s activities”.
In the eyes of the United States Supreme Court, a company is based where officers and employees work. And for most companies, this is the office.
This ruling — like most law — makes sense in generality, but breaks down in application. How can a company with no office have a “nerve center”, if officers, directors, managers, and employees are distributed? Is the nerve center Slack, email, the internet?
While updated rulings may revise this definition, it’s clear that in our current state, answering the question of where a company with no office is based doesn’t fit well into set precedents.
At Stable, we consider a company to be based at the business address on file with the IRS or State.
This definition allows for complicated geographic, operational, and legal nuances of specific organizations to be abstracted to a single point in the world — a business address.
Conveniently, the public and private sector have placed value on the business address as well. From IRS forms, to state filings, to banks, most third parties with which a company interacts require a business address.
The business address, we’ve found, is a good proxy for companies with no office to use when asked where they are based.
Actually finding a physical space to use for a company business address can be difficult, especially if you want to base your company in a location you know little about.
We’ve seen companies use a range of creative physical locations for their business addresses:
The physical space you use for your business address is, of course, up to you and oftentimes becomes a question of where in the world you want to actually base your company.
As you begin to think about where to base your company, it’s important to understand all of the implications the decision can have on your business. And while you should always consult a legal expert before making a final decision, here are some important factors we’ve seen customers consider when choosing where to base their company.
When employing individuals, selling goods, or conducting other operations in a state, you may qualify to be “doing business” there. This could make you liable for taxes and require you to complete other state level filings. If you’re already “doing business” in a state because of other business operations, it may make sense to base your company there as well.
Recruiting talent is expensive, and potential employees often associate where a company is based with desirability to work there. Basing a technology company in San Francisco or a finance company in New York can have a measurable impact on inbound candidates.
Jurisdiction of Litigation
The laws of the state where a company is based could apply to any litigation that company enters into. Some states are more favorable to corporations than others. If you believe your company will be entering into litigation often, this can be a very important factor to consider.
State Level Support
Grants, tax breaks or other support at the State level often require that your company be based in that state. If your company relies on this type of aid, you may have no other option but to base your company in that state.
Taxation rates and frameworks can differ by state. Some states have much more favorable taxation laws for corporations than others. If reducing tax burden is a business priority for your company, choosing a favorable state in this regard will be key.
Long Term Plans
If you plan to eventually have a physical space for your company, it likely makes sense to base your company, early on, in that same state. This can help avoid complicated legal filings and headaches associated with registering to do business in many locations.
Deciding where to base a company is a decision that should ultimately reflect business priorities — whether that be accessing top tier talent, reducing legal complexity or something else.
Understanding what it means for a company with no office to be based somewhere, and how to go about making that decision, is confusing and nuanced. Legal precedents have been set, but there’s still uncertainty because of the very nature of what it means for a company to have no physical presence.
If you’re interested in learning more about where you should base your business, or think a virtual address is the right solution for your company, check out our website and schedule a call with our team — we’d be happy to chat!