How to set up PayPal to take payments as a business

Bizer · 2026-10-01

PayPal's US merchant fee page, as it read on 1 October 2026, lists a PayPal Checkout payment at 3.49 percent plus 49 cents, and a standard card payment at 2.99 percent plus 49 cents. On a $20 sale through PayPal Checkout, that is $1.19, close to 6 percent. On a $400 invoice it is about $14.45. PayPal is a fine way to get paid, and it is at its most expensive on small tickets.

Fees change, and the full schedule covers international payments, currency conversion, chargebacks and more. Read PayPal's own merchant fees page rather than any summary, including this one.

Do you need a business account, or will personal do?

Business. Two reasons.

First, PayPal business accounts can no longer receive "friends and family" payments, according to PayPal's help center. That sounds like a downside. It is protection. A customer who pays you as "friends and family" to dodge the fee also has no purchase protection, PayPal treats it as a personal payment, and you have a muddled record of what was a sale.

Second, a business account keeps your sales out of your personal account. That matters when you do your taxes and more when someone audits them.

How to set it up

1. Get your paperwork in hand. Expect to be asked for your business type, legal name, address and a tax ID: an EIN, or your Social Security number if you are a sole proprietor. If you do not have an EIN yet, getting one is free from the IRS and takes minutes online.
2. Sign up at PayPal's business page, not the personal one, using an email address for the business rather than your personal inbox.
3. Link a business bank account and confirm it. Money you take for the business should land in the business account. Mixing it is the most common bookkeeping mess we see.
4. Confirm your identity when asked. This is also what shortens the payment holds described below.
5. Choose how customers will pay you. PayPal offers invoices, payment links, a checkout button for your website, and QR codes for in-person sales. QR code payments carry a lower listed rate: 2.29 percent plus 9 cents as of 1 October 2026.
6. Set your withdrawal habit. An instant transfer to your bank or debit card costs 1.5 percent of the amount, with a 50 cent minimum, per PayPal's fee page. A standard transfer is slower. Pulling every sale out instantly is a fee you choose to pay.

Why is my money on hold?

New sellers should expect it. PayPal's help center says payments to new sellers may be held for up to 21 days, to cover buyer complaints, and that funds become available faster as you build a selling history and confirm your identity.

Plan your cash around it. If your first big order pays for materials you have to buy next week, do not run that order through a brand new PayPal account. Use a processor you have history with, or ask for a deposit by bank transfer.

Holds and account limits are the real cost of PayPal. They are usually temporary, they are rarely explained in detail, and they happen at the worst moment. That is the main reason we would not make PayPal your only way to get paid.

What changed with the 1099-K?

The threshold went down and then came back. The One, Big, Beautiful Bill, signed on 4 July 2025, restored the older rule: per the IRS, a payment app such as PayPal does not have to send you a Form 1099-K unless you received more than $20,000 across more than 200 transactions in the year. The IRS also notes that there is no threshold for payments taken by card, and a platform may send the form below the threshold anyway.

None of this changes what you owe. Income is taxable whether or not a form arrives. Keep your own record of every sale and do not wait for PayPal to tell you what you earned.

Should PayPal be how you get paid?

As one option, yes. Plenty of customers have an account and trust the button, and offering it at checkout costs you nothing until they use it.

As the only option, no, especially for an in-person business. A card reader on a regular processor will usually cost less per sale at the counter, and two ways to get paid means a frozen account is an inconvenience instead of a crisis. If you are still choosing, setting up a way to get paid compares the routes.

What is uncertain

PayPal does not publish the rules it uses to decide when to hold money or limit an account, beyond the general guidance above. Two businesses with similar sales can have different experiences, and we cannot tell you in advance which one you will be. The fee schedule is also revised from time to time; the page we read carried the date 1 October 2026, and the one you read may not.