PayPal remains one of the most popular ways of accepting online payments, so you’re bound to be using it if you’re involved in online business. A question that comes up sooner or later is whether you should open a separate business account for each of your brands or products.
Separation of Personal and Business PayPal Accounts
First of all, I want to clarify that you should first of all have separate personal and business PayPal accounts. This is allowed by PayPal as detailed in this FAQ. You shouldn’t be mixing your personal transactions with those of your business. You should keep separate personal and business bank accounts and you should also do likewise with PayPal. Then link the personal PayPal account to your personal credit card or bank account, and the business PayPal account to your business credit card or bank account.
With that out of the way, the next stage as you continue to grow your business will be launching and selling more than one product. With revenue from both of these products coming in through the same PayPal account, there can be some challenges.
The first challenge you will encounter is that of accounting. Since you will be seeing the total amount of revenue generated from both your businesses, it will be hard to visualise at a glance how much of that revenue belongs to each business. Of course you will also hopefully have good reporting facilities from the e-commerce platform you are using which will somewhat compensate for this disadvantage. Moreover, if you are accepting payments through other systems apart from PayPal (e.g. Stripe/Braintree), you shouldn’t be looking at the revenue stats in PayPal as a measure of how you’re doing because that figure will be missing all other payments that would have come through via the other payments systems.
What to do if you have a separate company for each brand
As long as you have separate companies, there should be no issue at all. A company is legally distinct from its owner. Each can and should have its own bank account, credit card, email, etc. etc.
As a result, you will be able to sign each one up individually at PayPal. You will be the representative of your company for each PayPal account, but the PayPal accounts will each belong to the respective company.
And if you don’t have a separate company for each brand?
Here’s when things get tricky. Many business owners create a company and then sell a number of products/brands from that one company. This is usually when the question arises about whether they should have separate PayPal accounts for each product/brand.
There are a number of pros and cons for each way to go and no clear answer to this question.
If you are planning to spin off and sell a particular product or brand, you should always create a separate PayPal account for it and treat it as a separate entity from the rest of your business. During the selling process and the due diligence period, it will be so much easier for you and the buyer if you have a separate PayPal account housing the transaction of just that product that you will be selling off. Otherwise, you will have to filter things which can get messy, plus you won’t be able to just transfer the ownership of that product’s PayPal account to the new owner, which is a disadvantage for them as they won’t get the history of that account. This will affect your selling price so keep that in mind.
For the new owner, having a PayPal account that has been previously set up and having everything working smoothly is a very important bonus. The changeover will be easier and they will have a handy history of every transaction recorded from the inception of that product. Moreover, you have to also keep in mind that PayPal allows lower transaction rates depending on your monthly volume of sales.
Another thing to consider is whether you will have subscriptions and recurring payments processed through PayPal. If that’s the case I would recommend using two separate Paypal accounts as it will be very messy or downright impossible to move over those subscriptions to a new account in the future if needed (for example in the case of a sale of one of the products to a new owner).
Most e-commerce software systems provide additional and handy functionality through PayPal’s IPN system. This can allow you to do things like give refunds from the e-commerce system itself rather than having to login to your PayPal account to process the refund. If you use PayPal Standard, you can use a single account for multiple sites. If you use PayPal Express, you need to use a separate account for each site. This is because PayPal Standard supports multiple IPN URLs while PayPal Express only supports one.
Now if you decide to go for one PayPal account to cover all your products, it might be a good idea to still pass your payments through separate email addresses linked to the same PayPal account. This is very useful if you are receiving payments from several different sources. To give you a concrete example, imagine a blog having affiliate arrangements with tens or hundreds of product vendors. If they all have their own affiliate systems, as is frequently the case, you would have signed up with each vendor and gave them your PayPal email address. Now if in the future you sell that blog, the new owner would have a very tedious job having to log in to each of these affiliate accounts and change the PayPal email address to his instead of yours. However if you had used an additional email address to your company’s PayPal account, the transition would be much smoother. You would just have to unlink that email address from your company’s PayPal account, and concurrently the new owner would add that email address to his company’s PayPal account. From that moment onwards all payments will reach the new owner’s account, without having to change any settings on the vendors’ side.
To give you a concrete example, imagine a blog having affiliate arrangements with tens or hundreds of product vendors. If they all have their own affiliate systems, as is frequently the case, you would have signed up with each vendor and gave them your PayPal email address. Now if in the future you sell that blog, the new owner would have a very tedious job having to log in to each of these affiliate accounts and change the PayPal email address to his instead of yours. However if you had used an additional email address to your company’s PayPal account, the transition would be much smoother. You would just have to unlink that email address from your company’s PayPal account, and concurrently the new owner would add that email address to his company’s PayPal account. From that moment onwards all payments will reach the new owner’s account, without having to change any settings on the vendors’ side.
An important pro for having just one account for all your brands (if you don’t plan to sell in the immediate future) is easier management. You don’t have to log in to several PayPal accounts to check on things, you just have one account. Another potential issue with having multiple accounts is which account to process expenses from. If it’s not easy for you to associate expenses to a particular product, it might be a struggle to choose which PayPal account to use for them. For example, if you are using a backup service for all your product sites, and you want to make an automatic monthly payment, which PayPal account will you use if you have a number of them? Having just one account eliminates this problem altogether.
Another thing to consider is that PayPal assigns different commission rates based on the volume of transactions per month that an account generates. Thus if you have everything going into one account there might be a better chance for you to get the lowest rate than if you separate the accounts and hence lower the volume of each account.
How does it work with other payment processors?
Braintree does not allow you to run more than one website per account. You will, therefore, have to create a new Braintree account for each e-commerce store you have. The basic rule they use to determine whether a new account is needed is whether the URL is different for each of your products. So if you are selling all your products from www.mycoolstore.com you’re going to be fine with one Braintree account, but if you’re selling from www.blackstore.com and www.whitestore.com you will need two Braintree accounts.
Hopefully, this is helpful to you when deciding whether to open separate accounts for each product you own or not. Please leave a comment if you have any further questions and I’ll do my best to answer them.