If you or your employees work from home utilizing a computer, modem, fax machine, email or other electronic means to perform your job and communicate with your place of employment, you work in a virtual office. In other words, you're telecommuting. Even though a virtual employee may use a company email address, mailing address and phone extension, he still works from an outside location.

A virtual office doesn't necessarily have to be a room in a person's home, however. A laptop in a hotel or even at the beach will do. In most cases, a person who works from a virtual office is set up thanks to his place of employment. All equipment belongs to the home office and must be returned upon termination from that company.

The virtual office worker doesn't necessarily need to be an employee. He can also be someone who owns his own business and works from his home or on the road via laptop and wireless connection. The owner of a virtual office can also be an independent contractor or freelance worker, with no ties to one specific place of business.

The benefits of a virtual office are many. For instance, many overhead costs, such as electricity, are cut out or kept to a minimum for the company with virtual empployees. Telecommuting also eliminates crowded offices. As an added benefit, the virtual employee may agree to lower pay in exchange for the ability to work out of his home.

Working in a virtual office cuts out a frustrating commute. A virtual office worker can work in pajamas or sweats if he's so inclined, eliminating the cost of a pricey business wardrobe. Expenses such as office supplies can either be billed back to the home office or written off on his taxes. Telecommuting may even eliminate the expense of day care or a full time baby sitter. The virtual employee is able to work without the distractions of a busy office. He won't be interrupted by a coworker's phone calls, office gossip, or a last minute meeting.

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