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How Much is a Paypal business account? is it free?

If I run my own business from home on eBay, is it ok to use paypal as my bank account for tax purposes?

  • Hello I am starting my own trading business on eBay working from home. I am doing everything properly legally, but I just want to know about the bank account situation. I would find it much easier to use my paypal account for my funds, since I can take payments to it, send payments from it and buy postage from it. I read about keeping records of bank statements and identifying which transactions relate to my business. Is it ok if I use my paypal account for most of my transactions etc, provided I keep paper copies of all my paypal transactions for the business? I'm thinking that if this is the case, I never need use a bank account, other than to perform a kind of 'cash lift' every now and again by transferring some to my account so I don't have too much in my paypal. Thanks.

  • Answer:

    For tax purposes it does not matter what sort of account you use for business purposes. For administrative reasons it is a good idea to keep separate accounts for personal and business use. All you business transactions are kept away from your personal transactions so you can easily see which are which. All you have are occasional transfers between the 2. Either paying cash into the business, or taking cash out to pay yourself. However, Paypal is a daft place to keep your money. For one thing you are not earning any interest on it. You won't get much on a business current account, but every little helps. It is also not protected. If Paypal goes bust your money is gone. If someone hacks in your money is gone. You will have no chance of compensation if either of these happen. You will also come across situations where you need to pay people who do not take Paypal, or receive payments from people who do not want to use Paypal. You will need a proper bank account for this. By all means use Paypal where you can, but you should regularly move your excess balance into a proper, secure bank account.

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babs

Theoretically, yes, you can. But be very careful of keeping more than a smallish balance in there at any time - enough to cover any purchases you intend to make and maybe for a refund or two as well (in case you get a dissatisfied customer!) This is because PayPal can freeze your account without warning if you have a transaction problem, so through absolutely no fault of your own, you can find yourself unable to access all or part of your own money in your PayPal account until the matter - whichever of various reasons it might be - has been resolved to PayPal's satisfaction.

monkeymoo

I think the answer is yes. Just keep records of every transaction and make sure everything is traceable. You should also have a bank account that keeps the businesses money separate from your personal cash. Any money that you take out of the business for personal use also has to be accounted for, and unless you keep the funds separate you won't be able to do this.

Steve S

My only thought is that Paypal needs a current bank account linked to it to fund and receive payments from your Paypal transactions. Paypal is a payment medium and not an account as such. Of course the taxman will take all records as verification but I suspect that they will still need to see current accounts as well. I mean, you talk about a 'cash lift' but if you are running this as a business, then you need to live with regular drawings that must be verifiable. You will probably have to provide both Paypal and Bank statements in support of your self-employed status. And don't forget some people will pay by cash or cheque ...

MICHAEL P

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