PayPal’s Business Accounts are very helpful for business owners. However, when creating your account, you have to make sure you select the correct “Business type,” which can be confusing.
If you’re trying to create a PayPal Business Account, you’re probably wondering which “Business type” to select based on your LLC? I looked into PayPal’s business types, and how they go with an LLC, and this is what I found!
What PayPal LLC Business Type Should I Pick In 2023?
PayPal offers four “Business type” options when creating an account in 2023. However, only three are for business accounts. These are, “Individual/Sole Proprietorship,” “Partnership,” and “Corporation.” Furthermore, choosing one depends on which type of LLC pertains to your business in 2023.
If you’re interested in learning more about what PayPal’s business options stand for, what s-corporations, c-corporations, and LLCs are, and more, keep reading!
How Do I Choose a Business Type on PayPal?
When creating a PayPal Business Account, PayPal offers four (4) options to choose from when choosing the “Business type.”
You can choose:
- “Individual/Sole Proprietorship”
- “Corporation,” or
- “Nonprofit organization”
Moreover, when choosing one of these options, it depends on your business’s LLC type.
First of all, if you’re just a business and not a nonprofit organization, you can cross that option off the list.
Next, you need to consider your LLC type. Is your business a Single-Member LLC, Multi-Member LLC and is your business also an S-Corporation, or C-Corporation?
Single-member LLCs are owned by one person. Furthermore, multi-member LLCs are owned by multiple people, and can also be called an LLP, a limited liability partnership.
Moreover, your business can be a single-member or multi-member LLC, along with being an s-corporation or c-corporation.
S-corporations and c-corporations differ based on how your LLC is federally taxed.
Therefore, when picking a “business type” option, if your business is a Single-Member LLC, you should pick “Individual/SoleProprietorship”.
Furthermore, a multi-member LLC, or LLP, should pick “Partnership.”
Additionally, if your business is considered an s-corporation or c-corporation, along with being a single or multi-member LLC, you should pick the “Corporation” option.
Another thing to know is, a single-member LLC is different from a sole proprietor.
However, PayPal combines individual and sole proprietorship in one category, so, even though they are different, you will pick the same option.
Which Is Better- LLC or Sole Proprietorship?
If you have an LLC, you have protection for your business liabilities.
This means the owner is separate from the business, and won’t be pursued personally for any business debts.
Additionally, with an LLC, taxes are filed differently.
Furthermore, with a sole proprietorship, the owner and the business are not separated, and the owner will be held accountable for any business debts.
Moreover, choosing which one is best depends on the business and the business owner.
For example, if it’s a new business, a Sole Proprietorship may be better until your business grows more serious, and you want to protect yourself and your personal assets.
Do You Need an LLC to Use PayPal Business?
Fortunately, you don’t have to have an LLC to create and own a PayPal business account.
When creating a PayPal business account, you are first asked to enter your email and create a password.
After you finish, you’re taken to another page that asks you to “Fill us in on the basics,” and under that, “will this account be used for a registered business?”
PayPal says, “A registered business is an LLC, Corporation, Partnership, or Charity.”
Therefore, if your business is considered to be any of these, you need to click “Yes.”
However, PayPal also gives you the option to click “No,” which means you can have a PayPal business account, even if your business is not considered a “registered business” or has an LLC.
Additionally, when you click “No,” PayPal still gives you the “Business type” options to pick either “Individual/Sole Proprietorship,” “Partnership,” “Corporation,” or “Nonprofit organization.”
Fortunately, when creating a PayPal Business Account, you have a couple of “Business type” options to choose from that can go with your LLC. However, you don’t need to have an LLC to create a PayPal business account.
Furthermore, “Individual/Sole Proprietorship” goes with single-member LLCs or Sole Proprietors. Therefore, “Partnership” goes best with multi-member LLCs or an LLP, and “Corporation” goes best with s-corporations or c-corporations.