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Starting a Business? Virtual or Brick and Mortar?

The American Dream is to start your own business and prosper. Today, however, there is a new dimension to that aspiration. Should you open a traditional brick and mortar establishment or else become strictly an online e-commerce ‘virtual’ business that you operate from home? Retailing has undergone significant shifts in the last few years. Physical location businesses are still powerful. Yet, certain types of retail stores – music, book, and video – have become dinosaurs while online stores have prospered. Let’s look at the similarities and differences of each. First off, the mindset of the business owner is the same regardless of whether the business is virtual or operated at a physical location. You will still be an entrepreneur, whether your business is a restaurant, clothing store or online retailer of surfboards. The investment of time and energy, as well as the risk factor, is about the same. The business owner will be at the helm of either operation. Generally speaking, for a physical business, you should write a business plan, secure your financing, find a physical space, sign a lease, buy inventory, acquire design and fixtures, set prices, hire employees, advertise, promote and open your doors. Of course, in today’s business climate, if your business has a physical presence, then it will also have an accompanying online presence. For a virtual business, you should write a business plan, obtain a domain name, create the website, tell customers what goods or services you are offering, have products manufactured, figure out logistics and geography, hire some staff, promote and advertise, and fulfill orders. In other words, regardless of which type of business you launch, you will have to accomplish many, but not all, of the same tasks. The startup costs for a virtual business will be significantly less. Investment capital for a brick and mortar business can easily be in the hundreds of thousands of dollars once you include rent, inventory, employees and security. A domain name, however, may only cost $15 a year and a website can cost less than $1,000. You can work from home. Further, with a virtual business, you can advertise your goods and services, but only purchase the inventory after you get an order, effectively eliminating your inventory carrying cost. Customers usually pay the shipping. You will have to spend money on proactive online marketing, such as search engine optimization (SEO), keywords, etc., as well as the myriad of concerns surrounding online companies and e-commerce issues. There are a number of business, legal and taxation issues you will have to consider. Among them: the type of business formation (limited liability company, corporation, limited partnership, sole proprietorship, general partnership, etc.); federal and state income tax issues; sales and use tax issues; company terms and policies; privacy policies; data protection policies; online presence; geographical limitations; and other e-commerce rules and regulations. You will also need legal expertise, or legal advice, regarding ‘old world’ issues that eventually arise, such as negotiating, preparing and entering into a contract. R. D. Adair, PLLC offers experienced business counsel. To learn more about starting a successful business – virtual or brick and mortar – or how we may assist you in a related matter, contact us today to schedule a consultation.

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