Using A PayPal Business Account For Business: Everything You Need to Know
From setting up your account to navigating fees, learn how to make a PayPal business account work for your small business
If you’re reading this, I’m going to make a wild assumption and say that you probably have a PayPal account. As of early 2021, PayPal has reported a total of 377 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 wrote this piece to explain why, if you’re using PayPal to do business under your personal account, you should sign up for a PayPal Business account and do business under that account instead. And if you’re not sure how to open a PayPal business account, we’ll show you how to do so.
Table of Contents
- Why Use PayPal For Business?
- Differences Between PayPal Personal & Business Accounts
- Types Of PayPal Business Accounts
- How To Set Up Your PayPal Business Account
- Are There Any Paypal Business Account Fees?
- The Bottom Line On PayPal For Business Accounts
- Frequently Asked Questions About PayPal Business Accounts
Why Use PayPal For Business?
When you use PayPal for Business, you gain access to services, both free and paid, that can be immensely helpful to any online merchant. There are 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 own POS solution, Zettle. With PayPal’s recent acquisition of Zettle, PayPal’s former mPOS solution, PayPal Here, will not be offered to new users, but current PayPal Here users will be able to continue using the system.
Other PayPal features include the following:
- Online invoicing
- A Marketing Solutions package
- A virtual terminal
- A recurring billing service
- A long list of developer tools
Of course, other payment processors sport similar tools, so what’s the advantage to using PayPal for Business? PayPal itself would point to a recent study finding 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.
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.
What Is A PayPal Business Account?
A PayPal business account is a PayPal account that lets you accept payments and gives you access to eCommerce and POS integrations, online invoicing, a virtual terminal, recurring billing, and more. Setting up a PayPal business account is quick and easy, and there are no monthly or annual fees.
5 Benefits Of A PayPal Business Account
Why get a PayPal business account? Let’s explore the reasons.
- It’s Free: As mentioned, there are no setup costs or monthly/annual fees associated with getting a PayPal business account (unless you opt to use PayPal Payments Pro to accept payments).
- Access To Business Features: Use a PayPal business account, and you’ll gain access to features like a virtual terminal, recurring billing, a hosted checkout page, and invoicing. You’ll also be able to use PayPal Here/Zettle for mobile in-person sales.
- Sell Online Or In Person: Use PayPal for business and take payments online and offline. Accept multiple payment methods — credit and debit cards, PayPal and PayPal Credit, and mobile payment apps.
- Let Your Employees Use Your Account: Sign up for a business account and let up to 200 of your employees use your PayPal account. You can give each employee a unique login ID and level of authority.
- Integrations Galore: A PayPal business account will let you integrate with a wide range of shopping cart software. Brick-and-mortar merchants will find numerous POS integrations.
Differences Between PayPal Personal & Business Accounts
When comparing a PayPal business account vs personal accounts, know that both account types 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).
But 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 Zettle.
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, though 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 which can result in holds or terminations at the slightest hint of trouble, so be ready to provide whatever information PayPal might ask for.
Read our piece on avoiding account holds, freezes, and terminations to learn more.
Types Of PayPal Business Accounts
When you create a PayPal business account, you have three options for how you want to accept payments.
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 Checkout is free to sign up for, and there are no monthly fees.
PayPal Payments Standard
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
Like PayPal Checkout, PayPal Payments Standard is free — you won’t be paying any monthly charges.
PayPal Payments Pro
Unlike the above options, PayPal Payments Pro costs $30/month to use. It’s for merchants who want complete control over the checkout process. It’s also the only PayPal business plan that gives you a virtual terminal.
Here’s what you’ll get with PayPal Payments Pro:
- 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 and PayPal Payments Standard both offer recurring billing tools for no cost whatsoever.
How To Set Up Your PayPal Business Account
Looking for some setup guidance? Here’s how to create a PayPal business account.
- Click on the “Sign Up” box in the top right corner of PayPal’s page. If you’re already 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 go with 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.
- You’ll then 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. If your business type is anything other than Individual/Sole Proprietorship, you’ll also be prompted to enter your Employer Identification Number (EIN).
- You’ll then be asked to supply some more personal information: the last four digits of your SSN, your date of birth, and your home address.
If you’ve completed these steps, you now have a PayPal business account.
- At this point, you’ll 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 Zettle account. And if you want to sell goods through online marketplaces, you’ll be offered the chance to connect to such a marketplace.
- 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.”
- 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 comparison shown in the first “Compare options” screenshot below.
- 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” displays the comparison shown in the second “Compare options” screenshot below.
- 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, which we discussed in the Types Of PayPal Business Accounts section earlier.
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 Zettle, a suite of POS 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 Zettle page under the Tools drop-down menu in the toolbar on your PayPal dashboard.
After signing up for PayPal Zettle, you can choose from between four different ready-made POS store kits along with a selection of supporting hardware. And for mPOS functionality, you can order one of the two available Zettle mobile card readers ($29 and $79 respectively) and pair them with the free Zettle POS app.
Note that while new in-person sellers will be directed to PayPal Zettle, current sellers using PayPal Here — PayPal’s legacy mPOS solution — can continue to do so.
How To Upgrade Or Downgrade A PayPal Business Account
Want to upgrade your existing PayPal personal account to a business account? You can do this, but you’ll have to use a different email address for each account. To upgrade your current account to a business account, here’s what to do:
- On the PayPal home page, click “Sign Up” in the top right corner and then select the Business Account option. You’ll then be prompted to enter your existing personal account info. After doing this, you’re asked whether you want to switch your personal account to a business account. Choose “Use your current email to switch to a business account” and click Next.
- You’ll then be prompted to enter your business information. From there, follow the instructions in the “How To Set Up Your PayPal Business Account” section.
To downgrade your business account to a personal account, you’ll have to contact PayPal directly. It’s not something you can do yourself.
Are There Any Paypal Business Account Fees?
You can set up a PayPal business account without paying anything. It’s completely free to have a PayPal business account (unless you sign up for the $30/month PayPal Payments Pro plan). Of course, free payment processing doesn’t exist, and PayPal is no exception. Payment processing fees will apply when you make a sale through PayPal. Here are the per-transaction fees US-based merchants will pay:
- 2.9% + $0.30 per online transaction
- 2.29% + $0.09 per swiped, dipped or tapped offline transaction when you use PayPal Zettle or integrate with one of PayPal’s POS partners (current PayPal Here users can continue to process mPOS transactions at 2.7% per transaction)
- 3.49% + $0.09 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
Now, PayPal has announced that as of August 2nd, 2021, new rates will apply to current and future merchants. Here’s what US merchants will be paying as of that date:
- 3.49% + $0.49 per PayPal Digital Payments (PayPal Checkout, Pay with Venmo, PayPal Credit, Pay in 4, PayPal Pay with Rewards, and Checkout with Crypto) transaction
- 2.59% + $0.49 per online credit/debit transaction (2.99% + $0.49 per transaction if you have Chargeback Protection)
- 1.9% + $0.10 for PayPal/Venmo QR code transactions above $10
- 2.4% + $0.05 for PayPal/Venmo QR code transactions $10 and under
- 1.99% + $0.49 per online transaction for nonprofits
- 3.09% + $0.49 per Virtual Terminal transaction
- 4.99% + $0.09 per transaction under the MicroPayments plan
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, 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, you’ll lose $3.20. If you’re issuing lots 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 PayPal fee. For more on the costs of such things as card readers, conversion fees, and chargeback fees, read our article on PayPal pricing. 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 (with 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
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 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 Zettle POS solution 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, see our article on PayPal alternatives. You may want to have a look at our merchant account comparison chart as well. We also have an article comparing PayPal with traditional full-service merchant accounts.
As always, if you have experience using PayPal business account to accept payments, we’d love to hear about it! Please drop us a comment!