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Setting up PayPal Account Need Help with Business Type etc.

Forums: General Discussion
Created on: 04/18/09 11:20 PM Views: 1716 Replies: 4
Saturday, April 18, 2009 at 11:20 PM

I am setting up my PayPal account. Can anyone help with what Business Type I should choose? We don't have a business license although CC suggests setting up a Business PayPal account. The options are Individual, Sole, Partnership, Corporation, Non-Profit and Government Entity. Then what Category and Subcategory should I choose? Thanks for your help!!

Sunday, April 19, 2009 at 12:28 PM - Response #1

Hi Susie,

Unless you have established your reunion committee as an official organization with its own tax ID then you would choose Individual.

We've had several groups tell us that they selected Other Services and then Event Planning from the sub categories.

The system is set up to work with Web Site Standard when you reach that selection option - you do not need Web Site Pro.

Sunday, April 19, 2009 at 1:05 PM - Response #2

Thanks so much Jessica!!

Monday, May 4, 2009 at 10:59 PM - Response #3

OK, but there is a nasty problem with setting up as a Sole Proprietor. Somebody on the Reunion Committee has to be the Proprietor - and give their SSN or PayPal won't setup an account. PayPal then sends that person a 1099Misc at the end of year. In other words, the IRS thinks all those Reunion registrations were income and wants to tax you on it.

The only two ways I can figure around that is:
1) for that person to show all that income as a Donation. But since most reunion committees aren't officially 501(c)(3)'s that don't work.
2) that person needs to take all the expenses from the Reunion and show them as a "Busienss Expense" to offset the "income" on their taxes.

This is one, big, unexpected suprise for the person who agrees to be the PayPal contact.

SO - my question for Brad is . . .
How does the ClassCreator payment system handle tax accounting? Is your credit card processor going to report all the charges you're doing as income to ClassCreator? And is your accountant going to want to pass that all on to us?
OR are we supposed to be registering with our state tax authorities and paying sales tax?

All this is easy when you take checks under the table and never mention it to the IRS or the State revenue department. But when you get a Credit Card processor involved they send records to Uncle Sam.

Please tell me you've researched all this and have a plan Brad?

Tuesday, May 5, 2009 at 12:17 PM - Response #4

One of the primary reasons we created an internal checkout process was because of all of the misinformation that Paypal was giving to classes during sign-up and unfortunately sometimes after they had already signed up and were trying to get their funds released from Paypal.

The IRS considers a reunion committee that is collecting funds for the purpose of spending them on the reunion as a non-taxable entity -- that doesn't make them an official non-profit but it does mean they can collect funds to spend on the reunion and not have to file a return. If you want to get an official EIN so that it is not in any one persons name then See This Thread

We confirmed before we started that we were good on our end. If you follow the information on the thread link above I believe that is the best way to ensure you are fully covered on your end.

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