What type of Paypal and bank account to set up for online biz?

[Just H]

I've got the site built and am working to make the site professional. I'm planning to set up Paypal so I can invoice customers through there and take multiple types of payments for paying convenience. Does anyone know if I need a business Paypal account? Also, I want to set up a separate bank account - again do I need a business account or just one that I can keep all receipts and payments separate? This part is a bit overwhelming as the financial side is not my strong suit at all so any help is much appreciated. Thanks!

[rezzy]

This part is a bit overwhelming as the financial side is not my strong suit at all so any help is much appreciated. Thanks!

This is where my problem is to and which has kept me from really reaching my potential. But as far a Paypal, which I have researched.

If you will be completing alot of transactions the business account is the way to go. They do tack on usage charge which is based on the amount paid.

If you opt to keep a consumer account, Paypal may close(flag) your account, for not using a business account. They want people doing alot of transactions on a business account. This page outlines different account types. (https://www.paypal.com/us/cgi-bin/webscr?cmd=xpt/cps/general/PayPalAccountTypes-outside)

Other then that, I will be looking for people's response, because I need those answers too!

[KristineS]

We use Paypal Website Payments Pro, which allows you to take credit card and Paypal payments. Of course, we have retail stores, so we actually sell products on our sites. So far, we haven't had any major issues with Paypal. It is a bit finicky when it comes to credit cards sometimes, but it seems to behave fairly well. It was also relatively easy to set up. I did it and I'm by no means a web expert. Vangogh could testify to that.

As to what sort of bank account, that's a good question. Our accountants handle that stuff, so I'm hoping one of the financial experts we have around here on the forum can answer that one for you.

[Just H]

Thanks Rezzy and Kristine, that helps about Paypal for sure. Kristine, do you know what percentage Paypal takes then and how that works? Or is it dependent on the type of account you have?

[nealrm]

JustH,
Paypay takes a good chuck. There is an transaction fee that is a set amount plus fee that is a percentage of the sale. Unless you really need to accept credit card I would invoice them directly and accept checks as payments.

The fees on a $100 payment is $3.20. So you are losing over 3% of your profits just on transaction fees.

[Just H]

Don't they take percentages of any payments though if you're using a business account? Or is it less for payments other than credit card?

[Evan]

It's the same percentage. If I send you $100 that is in my business account, you'll only get the $97 or so, even if I didn't pay by "credit card".

While some do view this method as costly, I believe it's a cheap alternative. And PayPal does have a mixed reputation, but everyone knows what the brand is and is fairly comfortable transacting business with it.

[Just H]

Thanks for your help Evan and great to meet you! Do you know if the type of bank account matters or just that it's kept separate and only used for business? I'm thinking of just adding another through my current bank where I now have a checking and a savings. Is this acceptable for tax and accounting purposes or does it have to be specifically designated a business account. Thanks!

[rezzy]

Just H, I think part of wheather you need a seperate account is based on your business structure. Sole Proprietorships shouldnt need a separate business account since its you.

The other forms need it because you in essence an employee of the company, since the company is its own entity. You have to cut yourself a salary.

[KristineS]

3% is about right as far as what PayPal takes. I think the percentage varies based on the amount of business you do.

Paypal does have a mixed reputation. The nice thing about Website Payments Pro is that it doesn't look like Paypal. All the transactions stay on your site, and no one knows it's Paypal unless they want to use Paypal as a payments option.

[Just H]

Great, thanks for all the good info everyone!

[Spider]

Anyone have any comment about repeat payment through PayPal? - like when someone subscribes for $xx per month and the charge is automatically debited to their card or PayPal account and automatically credited to your PayPal account every month?

[Just H]

Great question Frederick, I didn't even think of that. Most of my work won't apply to monthly payments but it's great to know of that option so I'll be anxiously awaiting a reply on that too!

[Harold Mansfield]

As far as I know, when payment is made, you get paid. I use Pay Pal to receive payments and have never had a problem. I get an email letting me know that a payment was made and it is instantly available on my Pay Pal debit card.

If you have a business bank account, the use it, that account will serve to cover any overages and I am sure it would be easier on your accounting if they were both business accounts. That's really the only benefit. You can use any checking account, major credit card, and even some pre paid debit cards, to back up your Pay Pal account.

After 6 months without any problems you can get a Pay Pal business debit card and have instant access to your money without having to wait to transfer funds.

It is a pretty painless set up.

Pay Pal is owned by Ebay, and are in 39 countries with something like 100 million users, so they almost have down to a science.

[Just H]

Thanks eborg! That definitely makes me more clear and I'm sure helped clear up some issues for the others too. Anyone else have any PayPal pros and/or cons they want to share so we all can make the best decision for our small biz?

[billbenson]

Ya, I had a terrible experience with paypal. Large companies like GE and even credit cards for the US Navy got declined. Customer service didn't help. They just said the system rejected the charge. They couldn't say why.

My situation is different though. A lot of my sales are for high dollar amounts. I think they like sales to typical ebay sort of customers or companies like web hosts. When the US Navy tries to put 10k on a credit card and is declined, obviously they don't want that type of business. I have another credit card processor that I haven't had a problem with.

So to use paypal, I think you need to fit into their business model. I don't believe they do reoccurring payments either but I could be wrong on that.

[vangogh]

Paypal does do recurring payments. I've never used it to charge for anything, but I joined a site that charged me automatically through PayPal each quarter. It's actually a nice set up since it was very easy for me to cancel if I wanted.

The 3% is about right. It's a little bit higher, but it depends on which of their business plans you choose. The free one is a little over 3% though.

A part of me doesn't like that since the money has been taken out when someone was just transferring money to me, but overall it's a fair rate. My merchant account takes about the same amount. I think they end up being just under 3%

PayPal is easy to set up and easy to get. A merchant account will make you jump through hoops and they charge set up fees. I think when I add in the additional fees I probably get to keep more money when someone pays through PayPal.

The bad part about PayPal is if there's a dispute between merchant and customer they mostly favor the customer. I've never had a problem with that, though it probably has more to do with how I treat my clients than PayPal.

I think it's best to offer as many ways for clients/customers to pay as you reasonably can. PayPal is one nice option since it allows payment from an account or through a credit card.

[nealrm]

Just H,
You also asked about bank accounts. While it may not be necessary to setup a separate bank account for your business, I strongly suggest that you do. There are several advantages:

It is easier to separate business and personnel expenses at the end of the year.
In 2 income households, determining if your business is making money is simplified.
Checks with your business name are more professional.

[Just H]

Great points Neal. Thanks for adding. I'm all for the better organization and making things easier.