In this paper we propose a security architecture for Virtual Organizations for businesses. The Virtual Organizations we consider are based on web service technology to address interoperability issues and cater for future business software, and are dynamic, i.e. its membership may change frequently throughout its lifetime. The security architecture advances over previous approaches in two aspects: We propose a new approach for distributed administration based on policy generation which allows local security administrators to remain complete control over the policies deployed and we have designed a comprehensive security mechanism that can protect both, the web services in the VO and the VO administration services. We show the advantages of our architecture in a business case study. 1