legal and or ethical implications of virtual company

[jeremy goodrich]

If you run a small business, and you are interested in taking it to the next level, and you want to seem like a big player - complete with high profile executive team, ivy league schooling, etc. what are the ramifications if you just - make it all up?

In other words, say you invent some "company profile page" with nothing but false data, just to make it sound good. Now, these people don't exist, except in your head...and to make clients think there are 12 monkeys running the show, instead of 2. I believe this is possibly unethical (depending on your definition of ethics- but let's not go there) and this is perhaps 'dodgy' but is this illegal?

In any agreements with the company and clients, it would be made clear that there was only the people running the show doing the work, and the company name would be made very clear, to show who the contract was between, client and company. But for looks sake...there would be this incredibly slick page...with all sorts of "tasty" info...

Would this constitute fraud in some way? I haven't done this, but I keep thinking, this could help...if done properly. And there are those two guys who make American films, and even got a fake person nominated for an award, because they didn't want to have their names on the film too many times (I believe it was Fargo???). They didn't get into any legal trouble, and I believe the fake person's bio even made into into several print publications...

So if anyone can point me in the direction for some info relating to this...it would be appreciated. I'm trying to flush out a virtual company, making it as "real" as possible, and this seems like a good way to go. :) Thanks.

[Brett_Tabke]

>Would this constitute fraud in some way?

It's considered false advertising. Very illegal and against the biz standards laws of all states in the US.

[jeremy goodrich]

Okay, thanks, BT. So what happened to the guys who made Fargo? :)

[jeremy goodrich]

Oh, another aspect to this...two of the companies I've worked for in the last year were small businesses. Both of them, when asked, "How many people do you have?" by potential clients said they had about 5-10 more people than they really did.

So by what you said Brett, this would be false advertising and illegal for them to inflate their numbers. It's not like the IRS is going to do an audit if somebody complains, finds out it isn't true, and they are going to get busted...but I see how this could be a problem. So given that there is probably a big grey area in this issue how do you find out what is the actual law? Varies from state to state, or is there a federal statute?

Does number of employees count as advertising? Does a disclaimer of warranties in a terms of service document protect you from this kind of thing? People buy a product or service, from a company...it's not the company that they are buying, correct?

There must be some kind of "wiggle room" on this...and I'm looking for it. Thanks again, look forward to any advice, or experience on this one.

[oilman]

I'd say there is some kind of wiggle room but it is very small. For example a one man SEO operation might write the copy for his corporate site like: "We offer..." by simply pluralizing you can gain significant ground without risking anything. Secondly on your contact page setup email addresses for support, sales, info etc and the only sign the from the "Support Department" etc. This way you are not false advertising anything IMHO. There is still a limit though. A fake page of the non existent executive team will likely get you in trouble really quick.

[dwedeking]

90% of the reason we incorporated was for this purpose. By showing an "inc" it is assumed you are larger than a one man shop (we were two people at the time :) ). In sales meetings I usually say "I'll have the graphics department get on that". No actual numbers are said or usually asked for. By giving a professional appearance and speaking in generalities potential clients don't ask for exact numbers. Another thing is to play up the number of "contract workers". Something along the lines of "having a network of seasoned professionals that we can tap into". Who can verify this statement as a hard number? And don't you tap into the "seasoned professionals" here? :)

[rcjordan]

My web business is 99.99% virtual. This lack of the expected bricks & mortar and personnel was a huge stumbling point five years ago and even 2 years ago; VCs and other businesses simply couldn't comprehend the model. I've found that negative view to be fading over the last year, perhaps because the dotcom bust and the resulting drive for profitability has highlighted the importance of keeping the cost of overhead low. "Lean and mean" can be presented as a very savvy business plan now. As dwedeking pointed out, if you can demonstrate that you can create product or services via contract workers and freelancers that can go a long way towards establishing your credibility.

[john316]

I guess if you took money from clients or investors based on the premise that you had an "all-star" team to manage the company/projects, you would be committing fraud and you could expect some form of penalty if found out. If you just went around saying that you had an "all-star" team and didn't try to raise funds or solicit clientele, you would only be lying.

I'm pretty sure that neither practice is ethical (at least the last time I checked).

[NFFC]

You have to be honest in business, there is no other way, that isn't to say that you can't present the company in it's best light. We [hehe] have always made a virtue of being lean and exceptionally mean, it can be an effective marketing angle.

[rcjordan]

>We [hehe]

Yeah, I DO use the royal "We" in some of my emails during sponsorship negotiations. I assume they're thinking we=staff, but I'm thinking we=me & anyone else that might be working on the project.

[sean]

nffc> We [hehe]

You mean me, myself, and I?

jeremy> making it as "real" as possible

Well, I can think some great companies that were started by two guys scrapping for servers, and a whole laundry list of not-so-great companies with "All Star teams" that held cash bonfires.

[rogerd]

Legal issues aside, I hope personal ethics lead most of us to the conclusion that bald-faced lies are both bad business and a bad reflection on one's integrity.

Having said that, there is nothing wrong with creating the impression that one's operation is bigger and more successful than is really the case (at the moment!). Here are a few thoughts:

1) Let your web site speak for itself - the design, the amount of content, and the quality of the content will communicate to your visitors more than a phony "About Us" page. We've all visited sites that immediately convinced us that we were dealing with a quality operation - make yours one of those. This may mean professional help with graphics, copy, or wherever you feel your weak points are.

2) List departmental information and e-mail addresses. Nobody has to know that you are simultaneously the Sales, Human Resources, and Marketing departments. You'll hire separate staffers as soon as business volume warrants. :)

3) Need still more credibility? Set up an advisory board. This is like a board of directors, except you don't have to pay attention to them if you don't want to. You may have to cough up a few shares if you are a corporation, or otherwise compensate the advisors, but you might get some respectable sounding business and technology types to sign on. They can be sources of advice, contacts, and future funding, too. With their permission, you can list them (and their credentials) on your site.

[jeremy goodrich]

ahh, advisory board! that sounds very slick. good one.

think I'll go soliciting soon.

[richcasto]

Honesty is the best policy. For a good example of a virtual web team, see [siriuslink.com...] - their portfolio speaks for itself. (Note: I don't know these guys, I simply thought they are a relevant example.)

[ggrot]

>> You have to be honest in business, there is no other way, that isn't to say that you can't present the company in it's best light. We [hehe] have always made a virtue of being lean and exceptionally mean, it can be an effective marketing angle.

I might have to try that. We (there are two of us, but I'm the SEO guy) always try to play up the scale of the operation to clients with the 'we' tricks, multiple email addresses, 800 numbers, departments, etc. But I can see how coming out and simply saying that there are 2 highly skilled individuals involved and that number can scale (occasionally we bring in temp help on projects) for bigger projects, meaning that our clients are not paying for overhead might be a great strategy. It would definitely make our USP a bit more unique if nothing else. I'll have to ponder on that for awhile