How To Make A PayPal Business Account: 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!
When you use PayPal to do business, a PayPal business account gives you a plethora of advantages over a standard personal account. If you’re wondering how to make a PayPal business account, we wrote this guide for you.
Table of Contents
- Why Use PayPal For Business?
- Requirements For A PayPal Business Account
- 5 Benefits Of A PayPal Business Account
- How To Make A PayPal Business Account In 6 Steps
- Which PayPal Business Types Can Get A Business Account?
- Differences Between A PayPal Business Account VS Personal Account
- Types Of PayPal Business Accounts
- Paypal Business Account Fees
- Is A PayPal Business Account Worth It?
- FAQs About PayPal Business Accounts
Why Use PayPal For Business?
A PayPal business account gives you business features, both free and paid, that can be highly beneficial to any online merchant. There are three options for taking payments, two of which carry no monthly fees. You’ll get access to numerous eCommerce integrations, including Shopify, Magento, and BigCommerce.
What’s more, merchants who sell in person will get access to PayPal Zettle — PayPal’s in-house POS app — along with a number of top-notch POS integrations.
Other PayPal business account features include:
- Online invoicing
- A Marketing Solutions package
- A virtual terminal
- A recurring billing service
- A long list of developer tools
Of course, many other payment processors offer similar tools, so what’s the advantage of 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 offer online subscription services, sell your wares at “meetspace” events like crafting shows and conventions, or collect donations for a nonprofit organization, PayPal for Business has plenty to offer.
Requirements For A PayPal Business Account
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 enough 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 account holds or terminations at the slightest whiff of trouble, so be ready to provide whatever information PayPal might ask for.
Read our piece on avoiding account holds, freezes, and terminations to educate yourself on this important topic.
5 Benefits Of A PayPal Business Account
Here are the main benefits of getting a PayPal business account.
- It’s Free: There are no setup costs or monthly or annual fees associated with getting a PayPal business account (unless you opt to use PayPal Payments Advanced or 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.
How To Make A PayPal Business Account In 6 Steps
Here’s how to make a PayPal business account.
- Click on the “Sign Up” box in the top right corner of PayPal’s main page.
- Select “Business” and provide the requested information about your business.
- Enter the email address you’ll use with your business account. You’ll want to use a different email address than the one you use for your personal PayPal account (assuming you have one).
- Enter your PayPal business type. You’ll choose either Sole Proprietorship or Company. You can choose Sole Proprietorship even if you don’t have a registered business, while the Company option encompasses LLCs, partnerships, corporations, and nonprofits.
- Enter some basic business and personal information.
- Enter some additional business and personal details. A series of prompts will ask you for further details: the keywords that best describe your business, your estimated monthly sales, your website (optional), your Employer Identification Number or EIN (unless you chose Sole Proprietorship as your business type), your Social Security Number, date of birth, home address, and bank account information.
Once you’ve completed these steps, congratulations! You now have a PayPal business account.
Which PayPal Business Types Can Get A Business Account?
All types of businesses that comply with PayPal’s Acceptable Use Policy can use a PayPal business account.
If your business is a sole proprietorship, you can use a PayPal business account. Even if you don’t have a registered business and are just doing some selling on the side, you can still get a PayPal business account if you choose “Sole Proprietorship” in the account signup process. As discussed earlier, if you choose this option, you won’t have to provide an Employer Identification Number (EIN) when you sign up.
Note that any income you earn through your business account will be reported by PayPal to the IRS as business income whether or not your business is registered. Check out our guide to registering a business for more information about this process.
Partnerships, Corporations, & LLCs
If your business is a partnership, corporation, or LLC, you can sign up for a PayPal business account by choosing “Company” during the signup process. The process will be largely the same as it is for sole proprietors, though you will be asked to provide your EIN.
Note that while nonprofit organizations can use a PayPal business account to accept payments, you’ll need to provide additional information verifying your 501(c)(3) nonprofit status with PayPal in order to process donations at the discounted charity rate. Read our guide to PayPal for nonprofits for details on how to do this and for a larger discussion of the pros and cons of using PayPal as a registered nonprofit.
Differences Between A PayPal Business Account VS Personal Account
When comparing PayPal business accounts 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).
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 Zettle. Furthermore, a business account gives you more privacy, as you can make and receive payments with your business name. With a personal account, you’ll have to use your own legal name.
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 online store 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. Also, your buyers won’t need a PayPal account — they can pay with a credit or debit card.
PayPal Checkout is free to sign up for, and there are no monthly fees.
PayPal Payments Advanced
PayPal Payments Advanced is a more fully-featured payment solution than PayPal Checkout. For $5/month, Payments Advanced offers the same eCommerce integrations as PayPal Checkout while also letting your customers check out directly on your website. You’ll also get a healthy dollop of additional features:
- Accept PayPal payments and credit/debit cards
- Send invoices online for fast payment
- Accept payments in 25 currencies from 202 countries
- Simplified PCI compliance — PayPal handles the PCI burden
- No long-term contracts, setup, withdrawal, or cancellation fees
- Nonprofit discount available for PayPal transactions
- Toll-free phone support
- Offer special financing on purchases of $99 and up
PayPal Payments Pro
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 (which you can implement without Payments Pro, but it’ll still cost $30/month). 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 (this is what distinguishes these pages from what you get with Payments Advanced). However, you’ll have to take care of PCI compliance yourself, though you can use the optional Transparent Redirect feature to help achieve PCI compliance.
- 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 a handy feature, but competitors like Square and Shopify offer access to a virtual terminal without having to pay any monthly fee whatsoever.
- Recurring Billing: Payments Advanced and Pro both offer recurring billing tools to power your subscription sales. Unfortunately, recurring billing will cost you an additional $10/month. Oddly enough, PayPal Checkout offers recurring billing tools for no cost whatsoever.
Paypal Business Account Fees
You can set up a PayPal business account without paying anything. Of course, free payment processing doesn’t exist. Payment processing fees will apply when you make a sale through PayPal. Unfortunately, under the pricing scheme PayPal enacted in 2021, small-ticket merchants and those who rely on small donations/tips will pay more in fees than they would using many PayPal competitors.
Here are the per-transaction fees US-based merchants will pay:
- 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
- 2.99% + $0.49 per online credit/debit transaction with standard card payments
- 2.59% + $0.49 per online credit/debit transaction with advanced card payments (2.99% + $0.49 per transaction if you have Chargeback Protection)
- 2.89% + $0.49 per transaction if you’re on the Payments Advanced (not the same thing as advanced card payments) or Payments Pro plan
- 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 501(c)(3) 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 costs $30/month, whether you get it as a standalone feature or you get it through Payments Pro.
Overall, for mid-sized and larger businesses, PayPal’s fees are mostly comparable to those of other third-party processors, but merchants with small average ticket sizes will be disadvantaged by the high fixed portion of the transaction fees (49 cents on each online transaction). Competitors like Square and Shopify have the edge in this category. Their fixed fee for online transactions is 30 cents, and both offer a virtual terminal with no monthly fee.
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 2.59% + $0.49 transaction fee, the 49 cents is the fixed part) will vary based on the currency you use.
Is A PayPal Business Account Worth It?
If you’ll be using your PayPal account for business purposes, getting a PayPal business account is the obvious move to make. 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 — using either PayPal Zettle or one of the many shopping carts that integrate with PayPal, you’ll be able to take payments anywhere with ease. Small-ticket online merchants will likely save money on transaction fees by going with another processor, though. This is, by far, our biggest issue with PayPal.
- Read our full PayPal review for a truly in-depth look into PayPal’s pros and cons as a merchant services provider.
- See our article on PayPal alternatives if PayPal’s fee structure doesn’t suit your business or if you’re still comparison shopping.
- Check out our merchant account comparison chart for a quick visual summary of your top payment processing options.
- We also have an article comparing PayPal with full-service merchant accounts. Larger businesses may find that using a traditional merchant account makes more sense than going with a third-party processor.