Why You Need A PayPal Business Account If You Want To Take Payments Via PayPal

If you’re reading this, I’m going to take a wild shot in the dark and say that you probably have a PayPal account. As of the third quarter of 2019, PayPal has reported a total of 295 million active accounts worldwide. PayPal has become so embedded in people’s lives that many use their personal PayPal account to conduct business. However, by doing this, you give up the advantages that come with a free PayPal Business account.

We’re here today to explain why, if you’re a PayPal user doing business under your personal account, you should really sign up for a PayPal Business account and do business under that account instead.

Why Use PayPal For Business?

When you use PayPal for Business, you gain access to a plethora of services, both free and paid, that can be immensely helpful to any merchant making money from online sales. You’ll get three options for taking payments, two of which carry no monthly fees. You’ll get access to a plethora of eCommerce integrations, including Shopify, Magento, and BigCommerce. Offline merchants will get access to a number of POS integrations, as well as PayPal’s in-house mobile card reader and mPOS app, both of which are bundled together under the PayPal Here brand.

Other features available through PayPal include online invoicing, a Marketing Solutions package, a Virtual Terminal, a recurring billing service, and a lengthy list of developer tools. Of course, other payment processors sport similar tools, so is there truly any advantage to using PayPal for Business? PayPal itself would argue “yes,” and in favor of that argument, a recent study found that when a customer chooses PayPal as their payment method, they go on to complete the transaction 88.7% of the time — an average conversion rate 60% higher than that of other digital wallets and 82% higher than the average conversion rate of all other payment methods.

All things considered, a PayPal business account makes it simple and easy to send money back and forth. Whether you’re in the business of offering online subscription services, selling your wares at “meetspace” events like crafting shows and conventions, or even collecting donations for a nonprofit organization, PayPal for Business has plenty to offer.

Differences Between PayPal Personal & Business Accounts

Both personal and business PayPal accounts allow you to send and request money, make purchases, and even receive payments for sales you make — so long as you mark these sales as being for “Goods and services,” thus incurring transaction fees (and PayPal will check to make sure you’re not dodging transaction fees by mislabeling transactions). However, without a business account, you won’t have access to a host of commerce-facilitating features such as creating shipping methods, inventory tracking, allowing employees partial access to your account, and signing up for services like PayPal Here.

PayPal Business Account Requirements

The requirements to set up a PayPal business account are pretty minimal. You’ll need the following:

• An email address
• A business phone number
• Your legal business name — your own name is fine if your business is a sole proprietorship
• The last four digits of your SSN
• Your Employer Identification Number (EIN) — if you choose individual/sole proprietorship as your business type, you don’t need to provide an EIN
• Your date of birth
• Your home address
• Your bank name, account number, and routing number

This will be sufficient to start selling, but note that after you start actually accepting payments and making money, PayPal may request further documentation, such as bank statements. Third-party processors like PayPal and Square are notorious for their stringent scrutiny of merchants and their tendency to subject merchants to holds or terminations at the slightest hint of trouble. Just be ready to provide whatever information PayPal might ask for in the event that they detect something slightly suspect.

Check out our piece on avoiding account holds, freezes, and terminations to learn more.

How To Set Up Your PayPal Business Account

Start off by clicking on the “Sign Up” box in the top right corner of PayPal’s page. Note that if you are signed in to your personal PayPal account, PayPal will prompt you to either sign out of your current account and set up a separate business account under a different email address OR delete your current PayPal account and set up a business account using the email address previously associated with your old PayPal account. I assume most of you will want to choose the former option.

Next, you’ll be prompted to enter some information about your business. Enter the legal name of your business contact, the name and phone number of your business, and your business address.

Next, you’ll be asked to describe your business type. The options you’ll have to choose from are as follows: Individual/Sole Proprietorship, Partnership, Corporation, Nonprofit organization, or Government entity.

Next, you’ll be asked to further describe your business. You’ll be asked to choose the product or keyword that best describes your business, your estimated monthly sales, and your website (this one is optional), and you may also be offered the chance to receive a PayPal Business Debit Mastercard after you receive at least $250 in payments.

Now, if your business type is anything other than Individual/Sole Proprietorship, you’ll also be prompted to enter your Employer Identification Number (EIN). If you chose Individual/Sole Proprietorship as your business type, you won’t receive this prompt as you won’t have an EIN.

Next, you’ll be asked to supply some more personal information: the last four digits of your SSN, your date of birth, and your home address.

Once this step is complete, your PayPal business account will have been created. You’ll now be asked whether you want to request or send money and whether you want to send out an invoice (which will start the process of setting you up with PayPal Invoicing, a free service that allows you to create and send customized invoices)

After that, you’ll be prompted to select other PayPal services you may want to use. You can choose which online payment package you’d like to set up for online sales. If you’re in the business of offline sales, you’ll be offered the chance to set up a PayPal Here account. And if you want to sell goods through online marketplaces that PayPal integrates with, you’ll be offered the chance to connect to such a marketplace.

Keep in mind that you can always return to the set of signup options listed above by hovering over the “More” option on your PayPal toolbar at the top of the page and then selecting “Business setup.”

Let’s go back to setting up online payments for a moment. Click on “Set Up Online Payments” and you’ll be presented with the choice of processing all your payments through PayPal or adding PayPal as a supplementary way to get paid.

Depending on which option you select, you’ll then choose how you want to sell online. Choose “Process all payments through PayPal” and you’ll be offered two further options. With Option A, you work with an eCommerce solution that’s already integrated into PayPal. Option B lets you add HTML buttons to your website yourself. Below both options, you’ll see a “Compare options” link. Click it to see the following comparison:

 

Now, if you chose “Add PayPal Checkout as another way to get paid”, the two subsequent options will be different. Option A will be “I want a pre-built payment solution” while Option B will be “Use our APIs to add PayPal Checkout to your website.” Clicking “Compare options” will then display the following:

After you establish your payment setup, you’ll find an “Account setup” tab next to the “Payment setup” tab. Click on that to finish setting up your account.

From there, follow the links to confirm your email, link your debit card for Instant Transfers to your bank if you wish, link your bank account, make your business name clear for customers, and, should you so desire, get the PayPal Business Debit Mastercard.

Depending on the payment options you selected earlier, you’re going to need to choose between the three available payment packages for accepting payments online:

• PayPal Checkout (formerly Express Checkout)
• PayPal Payments Standard
• PayPal Payments Pro

If you want to add PayPal as a supplementary payment option to your existing website or if you already integrate with an eCommerce provider, PayPal Checkout is a solid choice. You’ll get PCI compliance (PayPal redirects customers to its secure site to complete the transaction), contextual checkout buttons, and localized payment methods for European customers.

PayPal Payments Standard is a more fully-featured payment solution than PayPal Checkout. Payments Standard offers the same eCommerce integrations and PCI compliance offered by PayPal Checkout along with a healthy dollop of additional features. Here’s the full list of what you’ll get with Payments Standard:

• Accept credit and debit cards (your buyers don’t need a PayPal account)
• Accept PayPal payments
• Send invoices online for fast payment
• Accept payments in 25 currencies from 202 countries
• Simplified PCI compliance
• No long-term contracts, setup, withdrawal or cancellation fees
• Nonprofit discount available for PayPal transactions
• Toll-free phone support
• Offer special financing on purchases $99 and up

Both PayPal Checkout and PayPal Payments Standard have the benefit of being free to sign up for with no monthly fees. PayPal Payments Pro, by contrast, costs $30/month to use. Let’s take a look at what you’ll get for the money:

• Hosted Checkout page: With Payments Pro, you can keep your customers on your website throughout the entire checkout process and customize the design of your checkout page. If you want to provide your customers with the most seamless checkout experience possible, Payments Pro is the way to go. However, this means that you’ll have to take care of PCI compliance yourself.
• Virtual Terminal: PayPal’s virtual terminal allows you to accept payments via phone, fax, or mail. Once you have your customer’s card number, you can key in those numbers from a browser window. It’s definitely a handy feature, and it always helps to be able to take payments by as many means as possible. However, competitors like Square and Shopify offer access to a virtual terminal without having to pay any monthly fee whatsoever.
• Recurring Billing: If you’re in the business of selling subscriptions, Payments Pro offers recurring billing tools to power your sales. Unfortunately, recurring billing will cost you an additional $10/month. Oddly enough, PayPal Checkout offers recurring billing tools for no cost whatsoever.

Bear in mind that to implement many of the features on offer with a PayPal business account, you’ll need a developer to help you do the heavy lifting.

Another feature you can sign up for on PayPal’s website is PayPal Here, a suite of services that allows you to accept offline payments via a mobile POS app and a PayPal card reader of your choosing. You’ll find the PayPal Here page under the Tools drop-down menu in the toolbar on your PayPal dashboard.

The first thing you’ll need to do is sign up for PayPal Here. Once you’ve done that, download the PayPal Here mPOS app onto your mobile device. Next, sign in to the app and order your card reader. Of the three card readers currently available, the Mobile Card Reader and the Chip and Swipe reader are both free until June 30, 2020, for new PayPal Here account holders. Also available is the Chip and Tap Reader + Charging Stand combo which you can purchase from PayPal for $79.99.

For a full rundown of the features included in PayPal Here, read our PayPal Here review.

Are There Any Paypal Business Account Fees?

There are no fees incurred when you set up a PayPal business account. It’s completely free to have a PayPal business account (unless you sign up for the PayPal Payments Pro plan). Of course, free payment processing doesn’t exist, and PayPal is no exception. This means that payment processing fees will apply when you make a sale through PayPal. If you’re a US-based merchant, Here’s what you’ll be paying per transaction in the based on the nature of the transaction:

• 2.9% + $0.30 per online transaction
• 2.7% per swiped, dipped or tapped offline transaction (when you use PayPal Here or integrate with one of PayPal’s POS partners)
• 3.5 + $0.15 per keyed transaction
• 2.2% + $0.30 per online transaction for nonprofits (check out PayPal For Nonprofits to learn more)
• 5% + $0.05 per transaction under the MicroPayments plan
• 3.1% + $0.30 per Virtual Terminal transaction

Keep in mind that the Virtual Terminal is only available if you have a PayPal Payments Pro plan, which costs $30/month. Overall, PayPal’s fees are comparable to those of other third-party processors, though as I mentioned earlier, both Square and Shopify offer a virtual terminal without a monthly fee.

One recent policy change that has sellers chagrined is that when a transaction is refunded, PayPal will not return the processing fee to you. That means that if you refund a $100 online purchase to a customer, the processing fee won’t be returned to you and you’ll lose $3.20. This may not sound like that much, but if you’re issuing a significant number of refunds, these costs add up quickly. For more on refund policies in the payment processing industry, check out our article on credit card refund fees.

This article doesn’t cover every single fee associated with using PayPal. For more on the costs of such things as card readers for offline sales, conversion fees, chargeback fees, and more, our article on PayPal pricing has the full story. And if you’re a seller outside the US, have a look at PayPal’s complete list of merchant fees, as the fixed portion of your transaction fees (when considering a 2.9% + $0.30 transaction fee, the 30 cents is the fixed part) will vary based on the currency you use.

The Bottom Line On PayPal For Business Accounts

We’ve established that if you’re going to use your PayPal account for business purposes, you really should get a PayPal business account. But how does PayPal stack up against competing payment processing solutions?

Overall, despite its shortcomings, PayPal is a solid option for merchants. With its relatively simple, transparent pricing and extensive eCommerce integrations, PayPal works particularly well as a starter option for new businesses and will scale with your business as it grows. What’s more, online sellers can always choose to use PayPal as a supplemental means of accepting payments. This isn’t the case with most of PayPal’s competitors.

PayPal has plenty to offer offline sellers as well — with PayPal’s in-house mPOS app along with its robust POS and accounting integrations, you’ll be able to take payments anywhere with ease. Read our full PayPal review for an even deeper look into what the payments giant has to offer your business.

That being said, PayPal obviously isn’t an ideal solution for everybody. If you’re not happy with PayPal’s business practices or if you’re in the process of comparison shopping, check out our article on PayPal alternatives. You may want to have a look at our merchant account comparison chart as well.

As always, if you’ve used — or are using — a PayPal business account to accept payments, we’d love to hear about it! Please drop us a comment!