Some of today’s hottest companies are virtual: They operate exclusively online, with employees and customers scattered all over the world. Yet to do business, these companies typically are still required by law to maintain a terrestrial office, to hold real-life board meetings, and to keep a paper trail made from dead trees.
That may soon change. The state of Vermont is set to become the first in the nation to offer a legal framework for virtual companies. In May, the state’s legislature voted to pass a law, which is expected to be signed this summer by Governor Jim Douglas, that would allow any private company to register in Vermont without opening a physical office, holding an in-person meeting, or filing a single sheet of paper. Companies could meet these requirements — which are mandated by most states in order to legally register or open a bank account — by using e-mail, instant messaging, or other software programs.
Vermont plans to charge fees of up to $275 a year for each virtual company registered, with state income taxes applying only to income generated in Vermont itself. The hope is to mimic the success of Delaware, which collects some $700 million a year in incorporation taxes and fees by offering low taxes, few regulations, and a business-friendly judicial system.
The Vermont law will allow entrepreneurs all over the world to take advantage of the relative legal certainty of the Green Mountain State. An entrepreneur in Africa, for instance, could register a company in Vermont without hiring a lawyer or even traveling to the U.S. “This is going to allow for ways of doing business that we can’t even imagine yet,” Robert Litan, vice president of research and policy at the Kauffman Foundation says.
Photo by woodsy.