Validating a business idea using Paypal as a payment processor before having a registered business?

by ubiq
9 replies
Hi there!

I'm currently going through the process of developing my first ever digital product/business.

As it's reaching the final stages, I'm a bit scared when it comes to choosing a payment processor.

I'm still a student and although I have high hopes and this is a very high-quality product, I would like to avoid going through the hassle of becoming a registered business without being certain that this product can provide the necessary cash flow to keep itself alive.

My initial plan was to launch, see when the cash flow starts flowing in, and then register as a business (I'm not in the US, it's mandatory in my country once you start receiving unexplainable money to your bank account). But from what I understand, PayPal sees a quick influx of money as suspicious behavior and freezes your account, then asks for your business details (which I might not have if I get frozen too soon) in order to unfreeze it.

Needless to say, this would really mess up my tempo and if it happens too soon, it would get messed up for good. I'm wondering what the threshold is before that happens.

Any insights? Would Stripe perhaps be a better choice for this? Thanks!
#business #idea #payment #paypal #processor #registered #validating
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  • Profile picture of the author professorrosado
    Why can't you start a business legally?

    If you need money, then you should test your idea locally in person and get a few bucks in sales and/or investors.

    If you can't do this, then how do you believe you can be a success online?
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  • Profile picture of the author Medon
    I agree the first thing you need to do is to test your product locally. If it is delivering on all its promises, you can launch it. I don't think PayPal will have an issue with the source of your money. You only need to validate your account by submitting your passport or government ID.
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  • Profile picture of the author agmccall
    Originally Posted by ubiq View Post

    PayPal sees a quick influx of money as suspicious behavior and freezes your account, then asks for your business details (which I might not have if I get frozen too soon) in order to unfreeze it.

    !
    Paypal only does this if you start receiving lots of money using a personal account. I do not know how many times this has happened to people and we always tell everyone. Upgrade your paypal account to a business account immediately. It is free and takes less than one minute. If you choose to conduct business with a personal paypal account then you are a fool.

    al
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  • Profile picture of the author Steve L
    Originally Posted by ubiq View Post

    Hi there!

    I'm currently going through the process of developing my first ever digital product/business.

    As it's reaching the final stages, I'm a bit scared when it comes to choosing a payment processor.

    I'm still a student and although I have high hopes and this is a very high-quality product, I would like to avoid going through the hassle of becoming a registered business without being certain that this product can provide the necessary cash flow to keep itself alive.

    My initial plan was to launch, see when the cash flow starts flowing in, and then register as a business (I'm not in the US, it's mandatory in my country once you start receiving unexplainable money to your bank account). But from what I understand, PayPal sees a quick influx of money as suspicious behavior and freezes your account, then asks for your business details (which I might not have if I get frozen too soon) in order to unfreeze it.

    Needless to say, this would really mess up my tempo and if it happens too soon, it would get messed up for good. I'm wondering what the threshold is before that happens.

    Any insights? Would Stripe perhaps be a better choice for this? Thanks!
    I definitely prefer Stripe over Paypal. If you're not wanting to do a custom Stripe checkout, you can use TypeForm integrated with Stripe. There are also payment solutions like SendOwl or Gumroad. A lot of options!
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  • Profile picture of the author vaibhavGHW
    When I started, I faced the same problem. But I actually managed to do those transactions over PayPal.

    If you are selling a good product or service, the chances of disputes will be negligible. Same was with my case, I started off as a personal account. Within the time-frame of 12 months, I only had one dispute from a stupid buyer. But I really managed to handle it.

    After I was sure about my business, I registered my company and since then there is no problem.

    Plus, if your country supports Stripe, (which was not true in my case) you should definitely go with Stripe rather than Paypal. They suck in a lot of your hard-earned money.

    Regards
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    • Profile picture of the author agmccall
      Originally Posted by vaibhavGHW View Post


      Plus, if your country supports Stripe, (which was not true in my case) you should definitely go with Stripe rather than Paypal. They suck in a lot of your hard-earned money.

      Regards
      Paypal and Stripe fees are the same. 2.9% plus .30 transaction fee

      al
      Signature

      Broken promises don't upset me. I just think, why did they believe me?
      ~Jack Handey~

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    • Profile picture of the author agmccall
      Originally Posted by vaibhavGHW View Post


      If you are selling a good product or service, the chances of disputes will be negligible. Same was with my case, I started off as a personal account. Within the time-frame of 12 months,
      Again. Why would anyone wait up to 12 months to do something that takes less than 5 minutes. And, you do not need business license or be incorporated. All you need is your Social Security Number, or whatever your own country uses.

      al
      Signature

      Broken promises don't upset me. I just think, why did they believe me?
      ~Jack Handey~

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  • Profile picture of the author Medon
    Originally Posted by ubiq View Post

    Hi there!

    I'm currently going through the process of developing my first ever digital product/business.

    As it's reaching the final stages, I'm a bit scared when it comes to choosing a payment processor.

    I'm still a student and although I have high hopes and this is a very high-quality product, I would like to avoid going through the hassle of becoming a registered business without being certain that this product can provide the necessary cash flow to keep itself alive.

    My initial plan was to launch, see when the cash flow starts flowing in, and then register as a business (I'm not in the US, it's mandatory in my country once you start receiving unexplainable money to your bank account). But from what I understand, PayPal sees a quick influx of money as suspicious behavior and freezes your account, then asks for your business details (which I might not have if I get frozen too soon) in order to unfreeze it.

    Needless to say, this would really mess up my tempo and if it happens too soon, it would get messed up for good. I'm wondering what the threshold is before that happens.

    Any insights? Would Stripe perhaps be a better choice for this? Thanks!
    I am wondering how difficult it is to register your business in your country. It will help you have the documents you need to verify your PayPal account. I think a registration certificate will be enough for this.
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  • Profile picture of the author Kay King
    Licensing requirements depend on the OP's country/region/state so no one can advise without having that info.


    Do NOT try to use a personal paypal acct - upgrade to a business acct before you try to sell anything.
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